Deducting State Sales Taxes

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ScoobyDoo
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Deducting State Sales Taxes

Post by ScoobyDoo » Tue Feb 05, 2008 9:32 pm

Okay, I live in a no-state income tax state and I want to deduct sales tax. Since I purchased a number of big ticket items in 2007, I want to calculate my deduction manually versus using the *standard sales tax rate* the IRS provides. But there isn't a lot of information out there about what purchases are and are not permitted in this calculation.

Can I include EVERYTHING I purchased in 2007 that had taxes added to it? Or only things I purchased in my home state? What about internet purchases (Airplane tickets, vacation packages, etc.)?

I did see an article that mentioned each state handles gas tax, utilities tax differently. But that is the only information online, in books I found.

-thanks
ScoobyDoo!

Wagnerjb
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Post by Wagnerjb » Tue Feb 05, 2008 10:35 pm

Hi ScoobyDoo: I also live in Texas and I take the sales tax deduction every year. I am not sure which method you are referring to with your question. As I understand it, either you use actual receipts to support your actual sales tax, or you use the table to figure your estimated amount based on your income. If you have any major purchases (I believe they use a car or boat as examples), you can use the standard tables, but add the tax on the car or boat on top.

Personally, I use actual receipts since I am an accountant and I tend to keep receipts for credit card matching anyway. In 2005, I sent a question to the IRS regarding the deductibility of out of state taxes paid. Here is the answer I got:

Dear Taxpayer,Thank you for your inquiry. You can include the sales tax paid in other states while on vacation, if you are choosing to deduct your actual sales tax paid instead of the sales tax tables. Sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate.

Personally, I have not been including gasoline tax in my numbers. I suspect they are considered excise taxes rather than sales taxes, but I don't have any strong feelings about it.

Best wishes.
Andy

mptfan
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Post by mptfan » Tue Feb 05, 2008 10:57 pm

Please note that you should only take the sales tax deduction if the total of your itemized deductions is greater than your standard deduction.

DonnaB
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Post by DonnaB » Tue Feb 05, 2008 11:02 pm

This year the IRS has an online calculator replacing the tables

http://apps.irs.gov/app/stdc/stdc.html

I'm not an accountant, but it looks like the items that can be separately deducted are as follows:

Specified Items

General Sales Tax You Paid on Specified Additional Items

Enter in the box provided any state and local general sales taxes paid on the following specified items. If you moved during the year, include the total for the year in that box.

1. A motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle). Also include any state and local general sales taxes paid for a leased motor vehicle. If the state sales tax rate on these items is higher than the general sales tax rate, include only the amount of tax you would have paid at the general sales tax rate.
2. An aircraft or boat, if the tax rate was the same as the general sales tax rate.
3. A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies.
* Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation.
* You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly.
* Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly.

Note: These definitions may change from year to year.

ScoobyDoo
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Post by ScoobyDoo » Tue Feb 05, 2008 11:06 pm

Yes, I am calculating with my receipts, as I have purchased a number of big ticket items in 2007. And I am itemizing.

It sounds like the answer to my question is that all sales taxes paid for any purchases, minus utilities and gas, is fair game. It takes a lot of research and work to figure out you are better off doing the tedious calculations if you purchased a lot of expensive furniture, car, etc.

Thanks for chiming in!
ScoobyDoo!

mptfan
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Post by mptfan » Tue Feb 05, 2008 11:11 pm

ScoobyDoo wrote:It sounds like the answer to my question is that all sales taxes paid for any purchases, minus utilities and gas, is fair game. It takes a lot of research and work to figure out you are better off doing the tedious calculations if you purchased a lot of expensive furniture, car, etc.


According to TurboTax, furniture and electronics do not count as big ticket items.

ScoobyDoo
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Post by ScoobyDoo » Tue Feb 05, 2008 11:36 pm

mptfan wrote:
According to TurboTax, furniture and electronics do not count as big ticket items.


I think you may be misunderstanding the options for calculating your deduction. 1) use the IRS standard sales tax table 2) use the IRS standard sales tax table + big ticket items (home improvements, car, boat) 3) Actual sales tax paid for EVERYTHING purchased in 2007.

I am planning on #3 since I purchased a lot of furniture, electronics, plane tickets, and vacation packages this past year. And it's pretty easy to download the transactions from Quicken (or bank/credit card statements) and calculate the exact taxes paid for everything.

All that said, Did I misunderstand the tax rules, your comment, or all of the above????? :shock:
ScoobyDoo!

tomd37
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Post by tomd37 » Wed Feb 06, 2008 8:25 am

Scooby is the closet of all the definitions. If you are going to use the sales table, then you can add the tax on certain items to the results obtained using the table. Such items would be tax on a car, motorcycle, ATV, RV, airplane, etc. plus major renovations to your home. You would have to look at the specifics in the instructions for all the details.

If you are going to use actual receipts, then everything counts as long as the receipt shows the sales tax (and not an excise tax). By the way, the tax you pay on gasoline is not a sales tax (at least in most states). Some local utilities reflect the state and local sales tax on their statements and those can be included.
Tom D.

Wagnerjb
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Post by Wagnerjb » Wed Feb 06, 2008 9:08 am

ScoobyDoo said:

And it's pretty easy to download the transactions from Quicken (or bank/credit card statements) and calculate the exact taxes paid for everything


I agree with Tom's comments. You would IMO be taking a risk if you simply took your payments that are recorded in Quicken or Excel and "back calculated" the sales tax. You need the actual receipt which shows the actual sales tax. I also agree on the gasoline tax (those receipts never show the excise tax amount anyway).

Once the sales tax deduction law was enacted, I became much more diligent about collecting all my receipts, even for cash payments (I would ordinarily only keep credit card related receipts). At restaurants, I often have to ask for the detailed receipts since they often just bring you the credit card slip at the end.

While I don't claim gasoline taxes, I am a bit more aggressive on travel related taxes. If a hotel receipt simply shows "tax" I will claim that amount. However if the tax is clearly labeled as something else like "stadium tax" I won't claim it. I also claim all taxes shown on airline ticket receipts, although I acknowledge they may not all be sales taxes in the strictest sense.

Best wishes.
Andy

ScoobyDoo
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Post by ScoobyDoo » Wed Feb 06, 2008 9:27 am

Wagnerjb wrote: You would IMO be taking a risk if you simply took your payments that are recorded in Quicken or Excel and "back calculated" the sales tax. You need the actual receipt which shows the actual sales tax.


But how many times have you saved receipts only to find them blank once you go back to view them? :? Magic, disappearing ink!!!! State and local taxes are 8.25 6% for state and the rest for local....that's not standard? At least, I know that to be true for clothes, food, furniture items, electronics...not so sure about airplane tickets.

It just seems to me that the IRS wants proof that you purchased these items, and a credit card statement or bank statement is much more reasonable :cry: than receipts that I could go through thousands of garbage cans to pick up!!!!!!!!! BTW: I am using quicken to get the downloaded data easily into excell but I have the bank, credit card statements. Now you have me afraid to try....
ScoobyDoo!

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Ted Valentine
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Post by Ted Valentine » Wed Feb 06, 2008 9:51 am

DonnaB wrote:This year the IRS has an online calculator replacing the tables

http://apps.irs.gov/app/stdc/stdc.html


Thank you for posting that link!
Although our intellect always longs for clarity and certainty, our nature often finds uncertainty fascinating.

tomd37
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Re: Deducting State Sales Taxes

Post by tomd37 » Thu Oct 12, 2017 1:10 pm

Scoobydo,
I realize your post was made back in 2008, but it is referenced in a current post on deduction of state and local sales tax. The original post made mention of claiming tax paid on airline tickets. That is an excise tax and cannot be claimed as a state and local sales tax for deduction on Schedule A. Just want to bring this to the attention of readers of the current post so they do not get the wrong idea of what a state and local sales tax vs. excise tax is.
Tom D.

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