This department has received several inquiries asking if new homeowners may deduct on Federal Schedule A, Itemized Deductions, sales tax paid by their contractor in building their new home. Under federal rules, the sales tax deduction is calculated using tables provided by the Internal Revenue Service or by adding up the actual sales tax paid by the taxpayer filing the return. The actual sales tax paid by the taxpayer may include any sales tax paid by an agent of the taxpayer.
Based on Federal income tax and Nebraska sales and use tax laws, an individual cannot include in his or her itemized deductions sales or use tax paid by any contractor who assisted in constructing the individual’s new home. Sales tax paid by the contractor and reimbursed by the homeowner is not considered to be tax paid by the homeowner. In addition, the contractor cannot be considered an agent of the homeowner under Nebraska law.