2005 Tax Law Changes
Taxpayers in 7 states can deduct sales taxes
As in 2004, residents of seven states will be able to deduct sales taxes in 2005.
Everyone else will have to make a decision.
The states where everyone will be able to deduct sales taxes are those without a state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
Residents of all the other states and the District of Columbia will have to decide: Deduct the sales taxes or deduct state and local income taxes. You won't be able to deduct both sales and income taxes.
This little change came in the American Jobs Creation Act of 2004, the tax bill Congress passed in the fall of 2004. Sales tax deductibility was repealed in the 1986 tax reform law.
The change was made because residents of Florida complained that it was unfair for residents of, say, New York to be able to deduct state and local income taxes when Floridians had no income tax to deduct. So, in the name of tax harmony, Congress came up with this solution.
How much will you be able to deduct? Everything you can document. But since few people expected this provision to be enacted, most taxpayers will have to settle for an IRS formula based on family size and adjusted gross income. You can find the tables in IRS publication 600.
Families with adjust gross incomes of up to $145,950 will be able to claim a full sales tax deduction. That's up from $142,700 in 2004. After those levels, the deduction will be phased out as your income rises.
While this deduction will mainly benefit taxpayers with no income tax, 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.
This provision is set to expire after 2005 unless Congress extends it.
For more information, see IRS Publication 17 and IRS Publication 553.
Taken from http://moneycentral.msn.com/content/P133794.asp
As in 2004, residents of seven states will be able to deduct sales taxes in 2005.
Everyone else will have to make a decision.
The states where everyone will be able to deduct sales taxes are those without a state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
Residents of all the other states and the District of Columbia will have to decide: Deduct the sales taxes or deduct state and local income taxes. You won't be able to deduct both sales and income taxes.
This little change came in the American Jobs Creation Act of 2004, the tax bill Congress passed in the fall of 2004. Sales tax deductibility was repealed in the 1986 tax reform law.
The change was made because residents of Florida complained that it was unfair for residents of, say, New York to be able to deduct state and local income taxes when Floridians had no income tax to deduct. So, in the name of tax harmony, Congress came up with this solution.
How much will you be able to deduct? Everything you can document. But since few people expected this provision to be enacted, most taxpayers will have to settle for an IRS formula based on family size and adjusted gross income. You can find the tables in IRS publication 600.
Families with adjust gross incomes of up to $145,950 will be able to claim a full sales tax deduction. That's up from $142,700 in 2004. After those levels, the deduction will be phased out as your income rises.
While this deduction will mainly benefit taxpayers with no income tax, 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.
This provision is set to expire after 2005 unless Congress extends it.
For more information, see IRS Publication 17 and IRS Publication 553.
Taken from http://moneycentral.msn.com/content/P133794.asp
posted by financial_ed at 5:16 PM
0 Comments:
Post a Comment
<< Home