There are several questions here but I'll try my best.
- State, local, and foreign income taxes
- State and local general sales taxes
- State, local, and foreign real estate taxes, and
- State and local personal property taxes
So at the end of the year when you file your federal income tax return for 2016, you may be able to deduct those types of state, local and foreign taxes paid in 2016 from your federal taxes (if you itemize deductions). You can only deduct 1 of the 2 from state, local income taxes OR sales taxes.
They way I understand that statement is that I can deduct taxes
withheld from my paycheck throughout the year - (please correct me if
Yes, from the link you provide:
The following amounts are also deductible:
- Any estimated taxes you paid to state or local governments during the
- Any prior year's state or local income tax you paid during
However, I believe you would normally deduct the amount of total tax paid from your state or local tax return. What would happen if you deducted the estimated or withheld state tax from your federal return and then when you did your state return you got a refund? You would need to go back and amend your federal return.
What if I chose not to withhold taxes throughout the year and instead
chose to pay all my taxes at once at the time of tax filing?
You will incur a penalty from the IRS. For W-2 employees this is normally avoided by completing the form W-4 so that appropriate taxes are withheld.
Or if I'm a sole proprietor and get paid from my clients?
You are required to make quarterly estimated tax payments.
Do I deduct the tax amount that I will pay for that year?
This isn't a deduction. You make quarterly payments, and when you file, those payments will be credited towards your tax liability.
As for filing/paying state income taxes, there are 50 different answers.