Bankrate's 2009 Tax Guide
Tips and tools
taxes
Purchases can help cut your tax bill

Most filers, however, will claim the amount that the IRS has figured for them in special sales-tax tables; one for each applicable state. The deduction amounts are based on the average consumption by taxpayers, taking into account filing status, number of dependents, adjusted gross income and rates of state and local general sales taxation.

The IRS tables with standard sales tax deduction amounts can be found in the Schedule A instructions. The IRS also offers an online sales tax deduction calculator.

But even with the tables, it's not quite that simple. In using the data, you need to keep a couple of things in mind to get the biggest deduction.

First, don't rely solely on your 1040 information when you read the table. The figure you enter on your federal return is taxable income, but Scharin says that the sales tax table amounts are based on total income, not just your adjusted, taxable income. You should take nontaxable income amounts into account for sales tax deduction purposes, he says, because the larger your total income, the larger your sales tax deduction.

These other types of income include municipal bond or other tax-exempt interest, workers' compensation, nontaxable combat pay, the nontaxable portion of Social Security and other retirement benefits, as well as the nontaxable parts of an IRA, including a Roth IRA distribution.

Also, most of the tables only cover the state rates. "If you have a local sales tax, which many people don't realize, you could be sacrificing some of the deduction if you use only the table amount," says Scharin.

To account for local sales taxes, you're going to have to do some extra calculating. If you're not using tax software, a work sheet, also in the Schedule A instructions, will help you determine the correct number.

advertisement

You also could have some extra math to do if you lived in different states that collected sales taxes. In this case, you must determine each state's sales tax amount to arrive at your appropriate, combined deduction.

While all these considerations will definitely mean more work for some taxpayers, Scharin says, "If you went this far and you're itemizing, you might as well get your full deduction."

Accounting for big-ticket items 
There's also another add-on, and it could be quite sizable. Sales taxes you paid on the purchase of motor vehicles, boats, aircraft and, in some cases, building materials for a substantial addition to or renovation of an existing structure can be counted on top of your sales tax table and local tax amounts.

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed, 0 point 4.28%  0.13 4.41%
15 year fixed, 0 point 3.30%  0.03 3.33%
5/1 ARM 3.30%  0.04 3.34%
 
View Rates in your area Search
Product Rate Change Last week
30K FICO-based HELOC 4.74%  0.01 4.75%
50K FICO-based HELOC 4.53%  0.02 4.51%
100K FICO-based HELOC 4.26%  0.02 4.24%
 
View Rates in your area Search
Product Rate Change Last week
60 month used car loan 2.86% --0.00 2.86%
48 month used car loan 2.79% --0.00 2.79%
60 month new car loan 2.94% --0.00 2.94%
 
View Rates in your area Search
Product Rate Change Last week
1 Year CD 0.90%  0.01 0.89%
2 Year CD 1.03%  0.02 1.01%
5 Year CD 1.59% --0.00 1.59%
 
View Rates in your area Search
Product Rate Change Last week
Balance Transfer Cards 15.67%  0.04 15.71%
Cash Back Cards 16.32%  0.04 16.36%
Low Interest Cards 10.91% --0.00 10.91%
 
Search
DAILY TAX TIP NEWSLETTER

Get expert advice during tax season on tax preparation and tips for cutting your tax bill.

advertisement

Connect with us