Sales Tax Deduction

Sales Tax Deduction — Taxpayers who itemize deductions will have a choice of claiming a state and local tax deduction for either sales or income taxes on their 2004 and 2005 returns. The IRS will provide optional tables for use in determining the deduction amount, relieving taxpayers of the need to save receipts throughout the year. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate. Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for sales or income taxes.

Proof The IRS Requires

Canceled checks or bank statements, and a paid bill showing the amount of the sales tax you paid.  The IRS has also released sales tax tables which you may use, if the table provides more of a tax deduction than the actual amounts you have records for. (IRS Link: IRS Publication 600, Optional Sales Tax Tables)

If you made large purchases during the year, and do not have in your possession a copy of the paid bill or bill of sale, you may find it beneficial to ask the merchant for a duplicate sales slip or bill of sale to document the amount of sales tax you paid.

Prepare for Your Adviser

Read through your checkbook, charge card statements and other methods you have used to pay for your expenses. 

When we prepare your tax organizer be certain to place those costs in the appropriate section

Qualified Expenses

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