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