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Using the State Sales Tax Deduction
By JLP | November 1, 2005
How many of you are aware that you can choose to deduct either your state income tax or your state and local sales taxes? It’s true as long you itemize your deductions and are not subject to limitations. The sales tax deduction is really beneficial when you live in a state such as Texas that does not have state income tax. Those who do have state income tax can use whichever deduction is more beneficial to them.
The sales tax deduction can be calculated one of two ways:
1. Keep your actual receipts for all purchases and deduct that amount. This is probably the way to go if you have made a large purchase during the tax year (i.e. a car or boat).
2. Use the sales tax chart in Publication 600, which divded up by state, income level, and number of exemptions. So, if you live in Texas, have a household income of $50,000 and claim 4 exemptions, you can deduct $887.
Remember, if you live in a state with state income tax, you will want to compare your state income tax amount with the sales tax amount to see which one will give you the better benefit.
Topics: Tax Planning, Taxes | 2 Comments »
November 2nd, 2005 at 7:34 pm
You can actually add certain large puchases on top of the tabled value. So if you buy a car, you can deduct that in addition to the tabled value without saving *all* of your receipts for the entire year.
November 3rd, 2005 at 12:50 am
*sigh* I remember my mom keeping receipts when we were growing up. And now I have to do it agian. (Although we can “Calculate” the deduction last year and this, in general that is not going to be possible. Actual receipts only. And it’s a PAIN to keep and track!)