Sales Tax Deduction and coupons?

Question

I have two questions about the sales tax deduction. My husband is in the Navy and he does not pay State Taxes (we line in IL) only Federal. My understanding about the sales tax deduction is that I have two choices, I can either deduct our state taxes (which we don't have) or I can add up all my sales tax for purchases for the year and pick which one I want to deduct. Of course, we do not pay state taxes so I would choose to add up my receipts and take the deduction. Is this the correct understanding? My second question is, I use coupons alot and sometimes my coupon savings dip into the sales tax. For example my sales tax on my receipt is 2.50 but my actual total is 1.25. Do I use the original sales tax or do I use the actual total since it is lower than the sales tax?

Answer 1

There's actually a third option, and very likely the one you'll want to use. The IRS has a table of how much sales tax you can deduct without going through the trouble of saving and adding up receipts. The number they allow depends on your state, family income and family size. If you,bought a car, plane or boat, you can add the sales tax on that to the amount in the table.

If you add up your receipts, you'd add up only what you actually paid, not what the sales tax would have been if you hadn't had a coupon.

Answer 2

Actually, you CAN still choose the state and local sales tax versus income tax. Congress passed the "Tax Relief and Health Care Act of 2006" which extended this option; follow the link below for details.

As to the coupons question, remember that the deduction is for sales taxes PAID:

==> If the receipt shows that the coupon is applied before the sales tax calculation, then the sales tax will already reflect the lower product price and you would use that figure.
==> If the coupon is applied AFTER the sales tax calculation, that probably just means that the store is treating the coupon as a fixed amount off your total bill ("$5 off a purchase of $25 or more" - that type of thing); in that case, you would still keep the sales tax figure on the receipt.

Bottom line: unless the receipt designates that the coupon is changing the sales tax figure, I would just go with the sales tax amount that is shown.

Answer 3

You can choose to use the higher of the two between state sales tax and state income tax.

Honestly, I have never heard of coupons being used to be taken off of sales tax directly, only reducing the purchase price, so if you have an item for $3 and you use a $1 off coupon, the price you are charged, and the price the sales tax is calculated off of, is $2. I would use the sales tax amount that appears on the receipt.

Contrary to what the other answer said, you can still deduct sales tax for 2006. The deduction expired at the end of 2005, however Congress did extend the deduction, but the law was passed after the IRS prepared the tax forms for 2006.

Answer 4

truly, you are able to %. the state and local sales tax as hostile to income tax. Congress exceeded the "Tax relief and nicely-being Care Act of 2006" which prolonged this option; keep on with the link lower than for information. As to the coupons question, do no longer ignore that the deduction is for sales taxes PAID: ==> If the receipt shows that the coupon is utilized formerly the sales tax calculation, then the sales tax will already mirror the shrink product cost and also you should use that figure. ==> If the coupon is utilized AFTER the sales tax calculation, that likely truly capacity that the keep is treating the coupon as a fixed volume off your finished bill ("$5 off a purchase order of $25 or more suitable" - that form of element); if so, you are able to although keep the sales tax figure on the receipt. base line: till the receipt designates that the coupon is replacing the sales tax figure, i could truly bypass with the sales tax volume it truly is shown.

Answer 5

You can no longer deduct sales tax on your schedule A. See below IRS link