Sales Tax Deduction Could End Soon
MULTI-STATE – You can deduct state and local sales or use taxes paid on purchases made during the 2014 calendar year if you itemize deductions on your federal income tax return. This includes cars, recreational vehicles, and boats.
Eligible taxpayers can either:
- Keep receipts and claim the actual amount of taxes paid
- Use the IRS Sales Tax Deduction Calculator (http://www.irs.gov/Individuals/Sales-Tax-Deduction-Calculator).
If you built a new or improved your home, you can deduct sales taxes paid on the materials incorporated into the real property improvement.
For this deduction to be eligible, the homeowner must have:
- Purchased the materials directly from, and paid tax to, the building materials supplier
- Worked with a contractor under a separated contract.
Lump sum contracts are not eligible for the deduction because the customer did not pay sales tax to the contractor.
Alternatively, if you live in a state with state income tax, you can deduct your local tax return. You can only choose 1 of the 2 deductions, not both. A couple filing married, but separate must use the same deduction method, no mixing.
The itemized deduction is claimed on Schedule A.
This deduction has been available since 2005, however, if congress doesn’t extended this tax break, it will no longer be available for 2015 or later.
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