| It's that time of the year again. Tax time! | | | | sake of simplicity. Plan ahead and make sure |
| It may not be one of the more enjoyable times | | | | you are picking the best option before |
| of the year, but it is definitely one of the | | | | signing on for the pre-determined deductions. |
| more important dates on the calendar. | | | | |
| Hopefully, you have listened to all the | | | | The ability to deduct amounts paid in state |
| advice and have started planning in advance. | | | | sales tax could significantly lower the |
| | | | amount of money you end up paying in income |
| If so, you probably already know that the | | | | tax, or at least lower than what you would |
| government has introduced a new way for you | | | | pay under the pre-determined deductions. |
| to lower your federal taxes, maybe even | | | | |
| dramatically lower your taxes; you now have | | | | This ability is particularly important if you |
| the choice to claim your state sales tax to | | | | live in one of the few states - Wyoming, |
| lower your taxable income on your federal tax | | | | Washington South Dakota, Tennessee, Florida, |
| return. | | | | Texas and Nevada, where there is no state |
| | | | income tax. Previously, if you were a |
| Deducting your sales tax in the US | | | | resident of this state you could not claim |
| | | | any state tax deductions. |
| While you used to be able to deduct amounts | | | | |
| paid in state sales tax, Congress took it off | | | | Now, thanks to the new rules, if you are a |
| the books in the Tax Reform Act of 1986. | | | | resident of one of these lucky states you can |
| Thanks, Congress. Fortunately, it is now | | | | now claim their state sales tax to reduce |
| back. Depending on your specific | | | | their taxable income on their US tax forms. |
| circumstances and where you live in the US, | | | | |
| this could be extremely important for your | | | | When will you be better off deducting your |
| tax planning. | | | | state sales tax? If you have made any |
| | | | significant purchases, such as a car, a boat, |
| Deducting your state income tax vs. state | | | | an airplane, luxury items or major events |
| sales tax | | | | such as a wedding. The sales tax you paid |
| | | | last year could be more than you paid in |
| The change in the law means you now have the | | | | state income taxes. |
| choice between deducting your state income | | | | |
| tax vs. your state sales tax. No matter what | | | | Save your receipts! |
| you choose, however, you have to first decide | | | | |
| to itemize your deductions. | | | | The most important thing to get your finances |
| | | | in order is to start planning for tax time |
| Instead of going through the process of | | | | now. The ability to deduct amounts paid for |
| itemizing your deductions, the IRS gives you | | | | state sales tax will only be useful if you |
| the opportunity to take a pre-determined | | | | have the receipts to back your itemizations |
| deduction from your taxable income, based on | | | | up. |
| your income level and state of residence. | | | | |
| According to the IRS, most people will simply | | | | Make sure you hold on to receipts for your |
| chose the pre-determined number; as many as | | | | expensive items, and fight the natural |
| 66% of all tax payers take the easy way out. | | | | instinct to take the easy way out and select |
| | | | the pre-determined deduction. |
| For some people, the pre-determined numbers | | | | |
| is going to be the better choice. A lot of | | | | If you have paid a lot of state sales tax in |
| the people who choose the pre-determined | | | | the US, this is your chance to pay less tax |
| deductions, however, are doing so for the | | | | to the federal government. |