Sales Tax Deduction Extended to 2006 and 2007

by Richard Chapo - Date: 2007-01-17 - Word Count: 379 Share This!

Traditionally, one has looked to claim the payment of state income taxes as a deduction on federal taxes in one form or another. Recent legislative changes have added sale tax payments into the equation.

In 2004, a unique tax code was passed as part of the American Jobs Creation Act of 2004. Within the morass of text, a new tax deduction was created. That deduction allowed people to substitute in the total sales tax they paid during the year in lieu of the state income tax when claiming a deduction on their federal tax return.

The sales tax deduction was considered a major help for people living in certain states. As you probably know, certain states do not collect income taxes from their residents including Florida, Nevada, Texas and Wyoming to mention a few. Since no income tax was collected, these people missed out on a deduction from their federal return. The sales tax deduction filled that gap.

While the sales tax deduction was a positive step, there was one problem. The American Jobs Creation Act was limited in time. Specifically, the deduction could only be claimed for the 2004 and 2005 tax years. Practically speaking, this means it has expired and cannot be claimed on your 2006 taxes. At least, that was everyone's belief.

As the Republican majority was about to be swept out of office, it decided to actually do some work. No Congressional period has passed less legislation during its term than the last one. Regardless, one of the steps was to pass the Tax Relief and Health Care Act of 2006. One of the provisions in the legislation extended the sales tax deduction through the 2007 tax year, to wit, you can claim on this year's tax return and next year.

Unfortunately, Congress procrastinated so long that the extension of the deduction does not appear in IRS forms mailed out at the end of the year. The Agency is trying to get word out, which is also the point of this article. If you wish to claim the sales tax deduction, you need to get a revised schedule A for your 1040 form. Alternatively, you can claim it on line 5 of the return and write "ST" next to the box. Bet the IRS computers are going to love that!

Related Tags: sales, tax, taxes, irs, deduction, forms, extended, extension

Rick Chapo is with Nomad Journals - makers of travel journals to preserve your travel experiences. Great Gifts! Your Article Search Directory : Find in Articles

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