It just makes sense to try and get the most money from the IRS and the best way to do that is to make sure all possible allowable deductions are taken each year. Each year the IRS tells taxpayers about the most common mistakes made in filing tax returns. It seems one the most common mistakes is incorrectly recording social security numbers on the forms.
About 46 million people itemize their taxes using the IRS Form 1040 and claim about one trillion dollars of deductions every year. Another 85 million folks take the easy way out and claim another half trillion dollars in standard deductions. Rushing through the filing process only makes it easier to make mistakes and no one wants to make a mistake in filing taxes. Don't overpay taxes. Be sure to take all allowable deductions related to state sales tax savings. Here's a few helpful tips.
State Sales Tax Deduction
Most everyone has a chance to take this valuable deduction. Especially if residing in a state which has no state imposed income tax. The trick is that taxpayers must choose between deducting the state and local income taxes or deducting the state and local sales taxes. For most folks in states where a state income tax is imposed, the actual income tax is more so deducting the income tax is a better deal for most. Taxpayers may check a box on line 5 of Schedule A as to which type of tax they wish to claim
Go to the IRS website at www.irs.gov and check sales tax tables to see how much the residents of certain states can actually deduct. Generally, taxpayers are allowed to deduct the state and local sales tax paid in the previous year if the tax rate was the same as the general sales tax rate. Sales tax on clothing, food, medical supplies, and motor vehicles are also allowed as a deduction even if the tax rate was less than the general sales tax rate. It can be rather confusing, so it may be best to get help form a tax professional.
States With No State Income Tax Benefit the Most
This sales tax deduction will mainly benefit those taxpayers in states that have a state and local sales, but no state income tax. These states are Florida, Alaska, Nevada, South Dakota, Texas, Wyoming, and Washington. In these states, a larger deduction may be given to taxpayers who paid more in sales taxes than income taxes.
According to the IRS website, taxpayers who received refunds of state or local general taxes in the previous year for amounts paid in the previous year, should reduce the previous year's state and local sales taxes by that amount. An example would be a taxpayer who has bought a new car and paid an enormous amount of sales tax. This purchase will boost the total sales tax paid and lower the total income tax paid. It's always best to check this out with a certified tax specialist, financial planner, attorney, or CPA.
IRS Website is Here to Help
Be aware that there's only one official IRS website – www.irs.gov/. Don't be fooled by any other sites claiming to be the official IRS or it's representatives. Fraudulent websites will appear to be only a little different from the official IRS website. Phony websites will use irs.com, or the suffixes .org or .net. Identifying the correct, official IRS Website is key in not getting ripped off.
This information is not intended to be a source of legal advice, and no information in this article should be considered or relied upon as legal, tax or financial advice on any specific matter. Never act upon general information on legal, tax or financial matters without seeking legal counsel regarding your particular situation. Check out the IRS website for more information.
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Related Articles:
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Tips to Get a Bigger IRS Tax Refund Check
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Sources:
kiplinger.com; The Most Overlooked Tax Deductions (accessed Mar 16, 2010)
irs.gov; Taxpayers Can Claim General Sales Taxes Instead of Income Taxes as Itemized Deduction (accessed Mar 16, 2010)
Mark Oehlert - Mark has 50 years life experience (wisdom comes with age, right?) and over 28 years experience writing copy for ads, articles, marketing ...
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