Itemized Sales Tax Deduction

The American Jobs Creation Act of 2004 gives taxpayers the option to claim state and local sales taxes instead of state and local income taxes when they itemize deductions. This option is available for the 2004 and 2005 returns only.

IRS Publication 600, Optional State Sales Tax Tables, helps taxpayers determine their sales tax deduction amount in lieu of saving their receipts throughout the year. Taxpayers use their income level and number of exemptions to find the sales tax amount for their state. The table instructions explain how to add an amount for local sales taxes if appropriate.

Taxpayers also may add to the table amount any sales taxes paid on:

bullet A motor vehicle, but only up to the amount of tax paid at the general sales tax rate; and
bullet

An aircraft, boat, home (including mobile or prefabricated), or home building materials, if the tax rate is the same as the general sales tax rate.

For example, the State of Washington has a motor vehicle sales tax of 0.3 percent in addition to the state and local sales tax. A Washington state resident who purchased a new car could add the tax paid at the general sales tax rate to the table amount, but not the 0.3 percent motor vehicle sales tax paid.

Following is the Optional Texas Sales Tax Table:

Income Number of Exemptions
at least Less Than 1 2 3 4 5 Over 5
0 20,000 375 427 461 487 509 538
20,000 30,000 488 555 599 633 660 697
30,000 40,000 564 641 691 730 761 804
40,000 50,000 629 714 770 812 847 895
50,000 60,000 687 780 841 887 925 976
60,000 70,000 740 840 904 954 994 1049
70,000 80,000 789 895 964 1017 1059 1118
80,000 90,000 834 945 1018 1073 1118 1180
90,000 100,000 877 994 1070 1127 1174 1239
100,000 120,000 933 1057 1139 1199 1249 1318
120,000 140,000 1009 1142 1229 1294 1348 1422
140,000 160,000 1076 1217 1309 1379 1436 1515
160,000 180,000 1140 1289 1386 1460 1520 1603
180,000 200,000 1200 1357 1459 1536 1599 1686
200,000 or more 1467 1656 1779 1872 1948 2052

Taxpayers will claim the deduction on line 5 of Schedule A, checking a box to indicate whether the amount represents sales tax or income tax.

While this deduction will mainly benefit taxpayers with a state or local sales tax but no income tax — in Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming — it may give a larger deduction to any taxpayer who paid more in sales taxes than income taxes. For example, you may have bought a new car, boosting your sales tax total, or claimed tax credits, lowering your state income tax.

Download IRS Publication 600

 

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Last modified: May 09, 2009