What is the Sales Tax Deduction
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.
JLP
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