George Saenz is taking a much-needed reprieve from his accounting (and column)
duties this week, so Bankrate is featuring reruns of recent columns.
What sales taxes (for states without income taxes) are actually
included as deductible under the 2004-2005 tax change. For example, phone, cell
phone and utility companies all charge tax on their bills, some of it going to
our state. Motor fuel is also taxed by the state. Are these taxes deductible?
After disappearing almost 20 years ago, a federal deduction
for state and local sales taxes is resurrected for 2004 and 2005. An individual
can choose between claiming their state income tax or state sales tax as an itemized
deduction on Schedule A. Presumably, most folks will choose the larger of the
two, and for those who don't have state income taxes, the sales tax is the obvious
calculating your state sales tax deduction, you can use your actual general sales
tax paid or the optional tables the IRS provides in Publication
600. The tables take into account income level and family size. Therefore
the tables give the larger deductions to the higher earners or larger families.
The taxes you actually paid, however, may be greater than the amounts shown on
the tables, depending on your spending habits.
taxes would come from all the receipts you kept for the year, if you knew the
law was going to change in November of 2004 and you kept all your receipts. Although
I can't speak for all utility and cell phone bills in the country, if the amount
is identified as sales tax and is at the same rate as sales tax charged in your
area, then it would form part of the tax for the actual deduction. If the taxes
were higher, then it is not a general sales tax and would not be deductible.
note that if you write off your cell phone for business, you would claim the sales
tax as a business deduction and not as part of the itemized deduction for sales
Sales tax on motor fuel would be deductible if separately
stated and taxed at the same rate that applies to all taxable items in general.
If higher, it is not a general sales tax.
In addition to the
table amounts, you can also add the amount of sales tax you pay on the following
- recreational vehicles
- sport utility vehicles
You can also include any state and local general
sales taxes paid for a leased motor vehicle, as well as sales tax paid on an aircraft,
boat, home (including mobile and prefabricated) or home building materials if
the tax rate was the same as the general sales tax rate.