Sch "A". Income taxes or general taxes deduction

[Lucho]

Is it optional to choose Income taxes or General sales taxes for the deduction in Sch A? or do taxpayers need to add up sales taxes paid during the year for all personal items and compare the amount with the state taxes withheld?

Maybe a silly question, but this year I see my client would benefit if choosing the general sales taxes.

Thank you for your comments.

Lucho

[Pacun]

Is it optional to choose Income taxes or General sales taxes for the deduction in Sch A? or do taxpayers need to add up sales taxes paid during the year for all personal items and compare the amount with the state taxes withheld?

Maybe a silly question, but this year I see my client would benefit if choosing the general sales taxes.

Thank you for your comments.

Lucho

You have a choice. The same way you do for itemized deductions. Think of State taxes paid as the standard deduction but consider that each person's standard deduction is different based on the information on the W-2. Think of sales taxes paid as itemized dedutions and follow the same rules (need receipts).

[Lucho]

You have a choice. The same way you do for itemized deductions. Think of State taxes paid as the standard deduction but consider that each person's standard deduction is different based on the information on the W-2. Think of sales taxes paid as itemized dedutions and follow the same rules (need receipts).

Thank you Pacun.

Lucho

[Hahn1040]

T/p does not have to use actual receipts, you can use the IRS chart for sales tax. It is based on income, number of exemptions and where you live. IRS has an online calculator: http://apps.irs.gov/app/stdc/stdc.html?_page=11&_cancel. OR use the worksheet in the program. IF they purchased a vehicle or certain other large ticket items, you can add that sales tax in addition to the amount on the chart. Be sure to add in for nontaxed income such as VA disability etc.that aren't reported on the return. The progran will add in the nontaxed portion of items on the return: social security, retirement, etc.

Tax Saving tip:

For some t/p that are subject to AMT, I use sales tax instead of state tax. If the deductions for taxes on the Sched A put them into AMT, then choosing sales tax or state tax may make no difference for Federal- But using sales tax will save on the state because it doesn't have to be subtracted. Also next year, if t/p has deducted sales tax, then you don't have to add the state tax deduction on line 10. OF course, generally if they are high enough into the AMT then the entry on line 10 doesn't affect the bottom line anyway.

This doesn't work for everyone with AMT- but it is an easy comparison to make.

[Lucho]

Thank you to Pacun and Hahn1040 for both of your detailed post concerning my question.

May God bless this forum and its members

Lucho

[SaraEA]

Sorry Hahn1040, but the ability to add the sales tax paid on large purchases to the sales tax table amount was not renewed for 2010. The only folks who can still do that had to purchase a car in 2009 but not pay the taxes (or fees in some states) until January 2010. I have no idea who might actually be eligible. Where on earth can you buy a car and not pay everything before you drive it away?

[Gail in Virginia]

SaraEA, I think you may have misunderstood. The sales tax on a new car is no longer deductible by itself - you cannot add it to your standard deduction or add it to the state income tax deduction on schedule A. However, you can still add the sales tax paid on the purchase of a vehicle, boat, etc to the amount of sales tax deductible according to the general sales tax tables in determining the amount of sales tax deductible instead of state income tax. And unlike the stand-alone sales tax deduction that was only available Feb. 15, 2009 through Dec. 31, 2009, this does not have to be a new vehicle, it can be a used vehicle.