Sales Tax Deduction Option, State and Local

[vc_row][vc_column][vc_column_text]

Sales Tax Deduction Option, State and Local

The Tax Relief and Health Care Act of 2006 extended the election to deduct state and local general sales taxes for 2006. The act was enacted after Schedule A (Form 1040), Itemized Deductions, and its instructions were printed. Because we were not able to include the instructions for figuring the deduction in the Schedule A instructions, we are providing this publication to help you figure this deduction.

You can elect to deduct state and local general sales taxes instead of state and local income taxes as a deduction on Schedule A. You cannot deduct both. To figure your deduction, you can use either:

  • Your actual expenses, or
  • The optional sales tax tables plus the general sales taxes paid on certain specified items.

IRS Publication 600, Optional State Sales Tax Tables, helps taxpayers determine their sales tax deduction amount in lieu of saving their receipts throughout the year. Taxpayers use their income level and number of exemptions to find the sales tax amount for their state. The table instructions explain how to add an amount for local sales taxes if appropriate.

Taxpayers also may add to the table amount any sales taxes paid on:

  • A motor vehicle, but only up to the amount of tax paid at the general sales tax rate; and
  • An aircraft, boat, home (including mobile or prefabricated), or home building materials, if the tax rate is the same as the general sales tax rate.

For example, the State of Washington has a motor vehicle sales tax of 0.3 percent in addition to the state and local sales tax. A Washington state resident who purchased a new car could add the tax paid at the general sales tax rate to the table amount, but not the 0.3 percent motor vehicle sales tax paid.

Taxpayers will claim the deduction on line 5 of Schedule A, checking a box to indicate whether the amount represents sales tax or income tax.

While this deduction will mainly benefit taxpayers with a state or local sales tax but no income tax — in Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming — it may give a larger deduction to any taxpayer who paid more in sales taxes than income taxes. For example, you may have bought a new car, boosting your sales tax total, or claimed tax credits, lowering your state income tax.[/vc_column_text][/vc_column][/vc_row]

Posted in
Ethics in the Workplace

Ethics in the Workplace

Ethics in the Workplace Workplace Ethics is a subject that we have all heard of. In fact, the subject of Ethics, in general, is something that most people are familiar with. And, what is commonly understood about ethics is there are ethics and then there are workplace ethics. What most people don’t realize, however, is…

REWARD EMPLOYEES FOR TEAMWORK

Reward Employees for Teamwork

Reward Employees for Teamwork By Joanna L. Krotz We’ve all heard the lecture. Success is built on teamwork. Each and every employee has value. Rah, rah, rah. Yet when the chips are on the table, it’s the lone rangers who walk away with big promotions, boffo salaries, and all the bravos. Managers talk about supporting…

8 Golden Techniques To Get People To Love The Rules

8 Golden Techniques To Get People To Love The Rules By Joseph Plazo Different things motivate different folks. Some people are motivated to enhance their appearance while others are motivated by prestige or conquest. Others are motivated by money. When it comes to work, many people are not motivated to do much of anything except…

HOW TO PREVENT, DETER AND DETECT FRAUD IN YOUR BUSINESS

How to Prevent, Deter and Detect Fraud in Your Business

How to Prevent, Deter and Detect Fraud in Your Business “Fraud has a direct impact on your company’s bottom line. It also threatens your company’s hard-earned reputation.” We have seen it all and we can help you become more savvy about preventing fraud and detecting it. Overview: What is Fraud? What are some warning signs…