My Personal Finance Journey

Personal finance observation, musing and decisions in a journey toward financial independence by 2020 with at least $3 million.


By Topics

Overall:
0. About (10)
1. My Progress (139)
2. Car & Home (107)
3. Credit (138)
4. Banking (33)
5. Saving (49)
6. Investing (308)
7. Taxes (89)
8. Spending (74)
9. Misc (97)
A. Archive (49)



MONTHLY ARCHIVE

Feb 2014 (3)
Jan 2014 (6)
Jan 2012 (1)
Apr 2011 (1)
Mar 2011 (1)
Feb 2011 (1)
Jan 2011 (1)
Dec 2010 (1)
Oct 2010 (1)
Sep 2010 (1)
Aug 2010 (1)
Jul 2010 (1)
Jun 2010 (1)
May 2010 (1)
Apr 2010 (1)
Mar 2010 (6)
Feb 2010 (2)
Jan 2010 (7)
Dec 2009 (3)
Feb 2009 (4)
Jan 2009 (8)
Dec 2008 (1)
Jun 2008 (2)
May 2008 (2)
Apr 2008 (5)
Feb 2008 (3)
Jan 2008 (15)
Dec 2007 (32)
Nov 2007 (6)
Oct 2007 (8)
Sep 2007 (9)
Aug 2007 (24)
Jul 2007 (2)
Jun 2007 (1)
May 2007 (3)
Apr 2007 (4)
Mar 2007 (4)
Feb 2007 (13)
Jan 2007 (6)
Dec 2006 (3)
Nov 2006 (7)
Oct 2006 (7)
Sep 2006 (6)
Aug 2006 (4)
Jul 2006 (10)
Jun 2006 (1)
May 2006 (3)
Apr 2006 (2)
Mar 2006 (6)
Feb 2006 (6)
Jan 2006 (3)
Dec 2005 (1)
Nov 2005 (9)
Oct 2005 (8)
Sep 2005 (13)
Aug 2005 (25)
Jul 2005 (16)
Jun 2005 (17)
May 2005 (19)
Apr 2005 (20)
Mar 2005 (24)
Feb 2005 (23)
Jan 2005 (36)
Dec 2004 (40)
Nov 2004 (34)
Oct 2004 (17)
Sep 2004 (21)
Aug 2004 (59)
Jul 2004 (37)
Jun 2004 (31)
May 2004 (29)
Apr 2004 (52)
Mar 2004 (49)
Feb 2004 (49)
Jan 2004 (31)
Dec 2003 (48)
Nov 2003 (52)
Oct 2003 (29)
Sep 2003 (8)
Aug 2003 (5)
Jul 2003 (2)
Jun 2003 (2)
May 2003 (5)
Apr 2003 (2)
Mar 2003 (2)
Feb 2003 (3)
Jan 2003 (29)



 

State Sales Tax Deductibility for Residents of WA and Six Other States

Contributed by mm | June 23, 2004 2:55 PM PST

A good new for Washingtonians: Seattle Times reported that the House has passed a bill that will allow state of Washington residents to deduct their state sales tax in their federal tax returns for tax year 2004 and 2005.

This new rule allows people to choose to deduct from state income tax or state sales tax (which is higher), so it basically only applies to all states that has sales tax but no state income tax (residents in states with state income tax are already able to deduct state income tax in federal tax returns). Besides Washington, the other applicable states are: Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Also, only itemized deduction fliers will be able to claim this tax benefit. The bill is still up to Senate and President signature to become a law, although the Seattle Times article suggests that it is very likely to happen.

A search on the United States House of Representatives website reveals the details of the bill (Section 501):


TITLE V--DEDUCTION OF STATE AND LOCAL GENERAL SALES TAXES
SEC. 501. DEDUCTION OF STATE AND LOCAL GENERAL SALES TAXES IN LIEU OF STATE AND LOCAL INCOME TAXES.

(a) IN GENERAL.--Subsection (b) of section 164 (relating to definitions and special rules) is amended by adding at the end the following:

``(5) GENERAL SALES TAXES.--For purposes of subsection (a)--

``(A) ELECTION TO DEDUCT STATE AND LOCAL SALES TAXES IN LIEU OF STATE AND LOCAL INCOME TAXES.--

``(i) IN GENERAL.--At the election of the taxpayer for the taxable year, subsection (a) shall be applied--

``(I) without regard to the reference to State and local income taxes, and

``(II) as if State and local general sales taxes were referred to in a paragraph thereof.

``(B) DEFINITION OF GENERAL SALES TAX.--The term `general sales tax' means a tax imposed at one rate with respect to the sale at retail of a broad range of classes of items.

``(C) SPECIAL RULES FOR FOOD, ETC.--In the case of items of food, clothing, medical supplies, and motor vehicles--

``(i) the fact that the tax does not apply with respect to some or all of such items shall not be taken into account in determining whether the tax applies with respect to a broad range of classes of items, and

``(ii) the fact that the rate of tax applicable with respect to some or all of such items is lower than the general rate of tax shall not be taken into account in determining whether the tax is imposed at one rate.

``(D) ITEMS TAXED AT DIFFERENT RATES.--Except in the case of a lower rate of tax applicable with respect to an item described in subparagraph (C), no deduction shall be allowed under this paragraph for any general sales tax imposed with respect to an item at a rate other than the general rate of tax.

``(E) COMPENSATING USE TAXES.--A compensating use tax with respect to an item shall be treated as a general sales tax. For purposes of the preceding sentence, the term `compensating use tax' means, with respect to any item, a tax which--

``(i) is imposed on the use, storage, or consumption of such item, and

``(ii) is complementary to a general sales tax, but only if a deduction is allowable under this paragraph with respect to items sold at retail in the taxing jurisdiction which are similar to such item.

``(F) SPECIAL RULE FOR MOTOR VEHICLES.--In the case of motor vehicles, if the rate of tax exceeds the general rate, such excess shall be disregarded and the general rate shall be treated as the rate of tax.

``(G) SEPARATELY STATED GENERAL SALES TAXES.--If the amount of any general sales tax is separately stated, then, to the extent that the amount so stated is paid by the consumer (other than in connection with the consumer's trade or business) to the seller, such amount shall be treated as a tax imposed on, and paid by, such consumer.

``(H) AMOUNT OF DEDUCTION TO BE DETERMINED UNDER TABLES.--

``(i) IN GENERAL.--The amount of the deduction allowed under this paragraph shall be determined under tables prescribed by the Secretary.

``(ii) REQUIREMENTS FOR TABLES.--The tables prescribed under clause (i)--

``(I) shall reflect the provisions of this paragraph,

``(II) shall be based on the average consumption by taxpayers on a State-by-State basis, as determined by the Secretary, taking into account filing status, number of dependents, adjusted gross income, and rates of State and local general sales taxation, and

``(III) need only be determined with respect to adjusted gross incomes up to the applicable amount (as determined under section 68(b)).

``(I) APPLICATION OF PARAGRAPH.--This paragraph shall apply to taxable years beginning after December 31, 2003, and before January 1, 2006.''.

(b) EFFECTIVE DATE.--The amendments made by this section shall apply to taxable years beginning after December 31, 2003.


The new law will not let people deduct the actual amount of the state sales tax (which will be a logistics nightmare anyway -- imagine you need to save every single grocery shopping receipts to claim the benefit). The government will publish a state-by-state table (yes, to make the tax code even more complicated) that considers the adjusted gross income (AGI), filing status, number of dependents and local sales tax rate. It seems that I will not be able to deduct the sales tax I paid for my second car last weekend, but at least I should be able to come several hundred dollars ahead.

Be the First to Comment on this Post


Add Your Comments










Remember personal information?




(It will take a few moments for your comment to be published. Please do not close the window until then.)


Read More ... 89 Posts In The Same Category










This page was last rebuilt at February 09, 2014 08:29 AM PST. (909 Words)
 

RSS FEED





PERSONAL FINANCE BLOGS I READ

Consumerism Commentary
Get Rich Slowly
My Money Blog
All Financial Matters
The Simple Dollar






.



Copyright 2003-2014, PFBlog.com. All Rights Reserved. (Privacy Policy)