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THE MOST OVERLOOKED DEDUCTION-SALES TAX!Jan 19 '10 Write an essay on this topic.The Bottom Line Looking for deductions? Check this one out! I am a self-employed bookkeeper/administrator for several different clients, including such industries as electrical, trucking and small business. I deal with general ledgers and financial organization. I am not a qualified CPA or tax professional. This piece is not designed as an advisory, merely a personal discovery I made a few years ago that is often overlooked by the general taxpayer. This deduction would be entered on the Schedule A (Itemized deductions) Form 1040. So if you don’t file a long form, it would not apply. The general sales tax deduction is often overlooked, ignored or unknown by some tax professionals, especially those of chain organizations who give their employees a brief training before throwing them to the dogs, as one might say. #1 Myth-You have to save your receipts: Wrong! You CAN save your receipts and use that total but if you haven’t, you have an alternative. The sales tax calculator on the irs.gov site gives you step by step directions in calculating your deduction. “Optional general sales tax tables included in the Schedule A instructions give taxpayers a sales tax deduction amount as an alternative to saving their receipts throughout the year and tabulating the amount actually paid. Taxpayers use their income level and number of exemptions to find the sales tax amount for their state. The line 5 instructions explain how to add an amount for local sales taxes if appropriate.” irs.gov. If your state imposes state and local income taxes, you must choose between deducting state and local income taxes or state and local sales taxes. For most citizens of income-tax states, the income tax is a bigger burden than the sales tax, so the income-tax deduction is a better deal. When using the sales tax calculator, you may enter specified sales tax charged on big ticket purchases of a vehicle, boat or home. Receipts or tax forms for these must be kept as back-up. If you have had a home built by a contractor, any sales tax charged is also a specified deductible. Here are a couple of calculations I tried: Under $20,000 gross income with 2 exemptions earned me a $284.00 deductible. $60.000 to $70,000 gross income with 2 exemptions earned me an $839.00 deductible. As you can see, the deductible amount is not to be scoffed at and could make a nice sized reduction on your return. It always makes a difference for me. Since I don’t collect my receipts, I take a copy of the deduction I have calculated online with the rest of my back-up to my tax preparer to remind her I want the deduction. I have found that some preparers don’t take this deduction into account unless you ask them to. If you decide to use the general sales tax deduction, please find more information at http://www.irs.gov/. Hope this info helps reduce your income tax bill as it does mine. Thanks for reading.  |
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