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10 March 2015

Texans: Don’t Forget the Sales Tax Deduction

Texans:  Don’t Forget the Sales Tax Deduction

If you file a Form 1040, the IRS is prepared to reward you for your purchases. However, it’s up to you (and your tax preparer) to not miss the opportunity. 

The federal sales tax deduction expired at the end of 2013 but was revived retroactively to cover 2014 returns. Despite this, it’s a deduction that’s often overlooked. That’s because taxpayers who file a Form 1040 have the option of claiming deductions for either state/local income taxes or state/local sales taxes…but not both.  In states that have an income tax, that particular deduction is usually the better option. But in states like Texas, with no state or local income taxes, this sales tax deduction can save taxpayers hundreds, if not thousands, of dollars.

There are three key considerations in order to take full advantage of this tax break:

  • The IRS tables only have the Texas state tax rate. It must be adjusted for all of the local taxes (city, transportation, etc.).
  • Do not overlook sales tax on large one-time purchases like a major home improvement purchase or a new vehicle. They can be deducted in addition to the amounts included in the table. 
  • Consider the option of keeping all your receipts and entering actual sales tax paid instead of using the sales tax tables provided by the IRS. This may save you even more, depending on what you’ve purchased and how well you’ve organized your receipts.

To find out just how much you could save on your 2014 tax return by simply taking advantage of this tax break, use the IRS Sales Tax Deduction Calculator or contact Steven Bankler, CPA, Ltd

Image Copyright: 123RF Stock Photo



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