Standard Sales Tax Deduction is Miserly -- here's my way

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
McCharley
Posts: 276
Joined: Tue Apr 12, 2011 5:45 pm

Standard Sales Tax Deduction is Miserly -- here's my way

Post by McCharley » Sat Mar 12, 2016 7:50 pm

Boglers,

After saving all of my receipts this year, it is clear that the standard sales tax deduction would only have given me about 1/3 of the money I actually spent on sales taxes (in Seattle at 9.6%, no income tax). If you are in a high sales tax location, saving receipts can save you big on tax deductions! :sharebeer

I am not sure the IRS would like my methodology, though. :confused Rather than add up the tax on all the receipts (which would fill several shopping bags :annoyed ), I compiled a spreadsheet based upon credit card transactions. I use a credit card for everything just for this reason. I divided my purchases into categories: restaurants, booze, groceries, and merchandise. I sorted the spreadsheet by merchant and then sampled the receipts for that merchant, creating a "taxed rate" for each category. Restaurants, for example, charge tax only on the bill, not the amount of tip, so the overall tax rate is below 9.6%. Alcohol has a very high tax rate (20.5% spirits tax here). As food is not taxed, I found that the grocery store bill was not even worth including for tax purposes, even though taxable things were purchased there.

I think this estimated sales tax method is reasonably accurate -- certainly closer to the truth than the absurd standard deduction. If I get audited I do have all the receipts and can go through the pain of sorting them at that time. :|

If you are taking the standard sales tax deduction you might want to just check your credit card year-end summary to see if you could do better! :beer

letsgobobby
Posts: 10478
Joined: Fri Sep 18, 2009 1:10 am

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by letsgobobby » Sat Mar 12, 2016 7:59 pm

I also live in WA. We're not big spenders though. We eat out in Portland, mostly (no sales tax). We buy some groceries. Don't buy a lot of normally taxable 'stuff', and my standard sales tax deduction was, what, around $3000? Did I really buy more than $27,000 of taxable stuff in 2015? I doubt it.

Since the allowed standard deduction is higher the higher your AGI, this will vary from taxpayer to taxpayer.

JGoneRiding
Posts: 964
Joined: Tue Jul 15, 2014 3:26 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by JGoneRiding » Sat Mar 12, 2016 8:12 pm

also in WA I only compute years i have a "big" purchase. It actually allows for you to put in "big" purchases and still compute a "standard" regular deduction--at least it did say the year I bought my car. otherwise my goal is to not flag myself for audit so I just take the standard allowed

betterfinances
Posts: 530
Joined: Tue Dec 08, 2015 10:22 am

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by betterfinances » Sun Mar 13, 2016 1:12 pm

I wonder how your method would be treated by a tax auditor if one were to get audited?

dstac
Posts: 52
Joined: Sun Jun 02, 2013 5:12 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by dstac » Sun Mar 13, 2016 1:19 pm

Ok, my interest is piqued. How much of a difference did it make for you? Extra 5%, 10%, 20%, more above the standard deduction?

Pyrite
Posts: 49
Joined: Fri Feb 21, 2014 2:52 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by Pyrite » Sun Mar 13, 2016 6:58 pm

FYI, I looked into this a while ago, and as I recall my conclusion was that the liquor tax is not deductible, because it is not considered a general sales tax. (Though if there is also sales tax you can deduct that part.) However, I would be happy to be proven wrong so I could deduct the tax on my husband's expensive bottles of scotch.

Gill
Posts: 3501
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by Gill » Sun Mar 13, 2016 7:01 pm

Pyrite wrote:FYI, I looked into this a while ago, and as I recall my conclusion was that the liquor tax is not deductible, because it is not considered a general sales tax. (Though if there is also sales tax you can deduct that part.) However, I would be happy to be proven wrong so I could deduct the tax on my husband's expensive bottles of scotch.

You're right on that liquor tax which is an excise tax, not a sales tax, and not deductible.
Gill

User avatar
dodecahedron
Posts: 3195
Joined: Tue Nov 12, 2013 12:28 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by dodecahedron » Sun Mar 13, 2016 7:22 pm

letsgobobby wrote:I also live in WA. We're not big spenders though. We eat out in Portland, mostly (no sales tax). We buy some groceries. Don't buy a lot of normally taxable 'stuff', and my standard sales tax deduction was, what, around $3000? Did I really buy more than $27,000 of taxable stuff in 2015? I doubt it.

Since the allowed standard deduction is higher the higher your AGI, this will vary from taxpayer to taxpayer.


The IRS estimated sales tax deduction is not based purely on AGI. You can add in other things as well:

IRS sales tax estimator wrote:What Income Should You Include for Determining Your Optional State & Local Sales Tax Deduction?

Your income is the amount shown on your Form 1040, "Adjusted Gross Income" line, plus any nontaxable items, such as the following:

Tax-exempt interest
Veterans' benefits
Nontaxable combat pay
Workers' compensation
Nontaxable part of social security and railroad retirement benefits
Nontaxable part of IRA, pension, or annuity distributions. Do not include rollovers
Public assistance payments
And any other nontaxable items
If married filing separately, do not include your spouse's income.

Note: These definitions may change from year to year.


Someone who saves a large portion of their income and/or who spends a disproportionate share of their income on goods and services not subject to sales tax (e.g., mortgage, medical services, insurance premiums, property taxes, etc.) may find that the IRS estimate is overly generous. Someone else who is spending a disproportionate share of their income on goods and services subject to sales tax (e.g., those with little or even negative savings, no mortgage, no medical, but lots of purchases of consumption items and services subject to tax, e.g., household furnishings, restaurant meals, hotels, etc.) may find that the IRS estimate is overly stingy. In particular, people who live in a zipcode with little or no sales tax but who frequently travel to and shop in places with big sales taxes (e.g., big cities like NYC, Boston, DC) will find the IRS estimator seriously underestimates.

This is something I have paid little attention to in the past, since my state income taxes were so much greater than my state/local sales tax but given the generous tax treatment of retirement income by NYS and my general spending patterns, I am definitely thinking of tracking sales tax spending more closely in the future. A lot of my spending on items subject to sales tax is done at Amazon--I wish they would just total it up for me, but at least it is not a ton of work to look in my order history.

User avatar
TimeRunner
Posts: 1121
Joined: Sat Dec 29, 2012 9:23 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by TimeRunner » Sun Mar 13, 2016 7:41 pm

dodecahedron wrote:A lot of my spending on items subject to sales tax is done at Amazon--I wish they would just total it up for me, but at least it is not a ton of work to look in my order history.
Easy to total it up yourself. Go to: Your Account > Your Orders > Order History Reports and download your report for 2015. Sum the appropriate tax column and you've got it.
One cannot enlighten the unconscious. | Endurance athletes are the Bogleheads of sports. | "I like people - I just don't want to be around 'em." - Russell Gordy

User avatar
dodecahedron
Posts: 3195
Joined: Tue Nov 12, 2013 12:28 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by dodecahedron » Sun Mar 13, 2016 8:37 pm

TimeRunner wrote:
dodecahedron wrote:A lot of my spending on items subject to sales tax is done at Amazon--I wish they would just total it up for me, but at least it is not a ton of work to look in my order history.
Easy to total it up yourself. Go to: Your Account > Your Orders > Order History Reports and download your report for 2015. Sum the appropriate tax column and you've got it.


Wow--very nice! I had no idea Amazon would give me a spreadsheet. Very handy! Thanks for pointing this out.

tomd37
Posts: 2601
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by tomd37 » Sun Mar 13, 2016 8:52 pm

Sounds like dodecahedron is a TCE or VITA volunteer. :thumbsup
Tom D.

Wagnerjb
Posts: 7007
Joined: Mon Feb 19, 2007 8:44 pm
Location: Houston, Texas

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by Wagnerjb » Sun Mar 13, 2016 9:09 pm

dstac wrote:Ok, my interest is piqued. How much of a difference did it make for you? Extra 5%, 10%, 20%, more above the standard deduction?


I keep receipts, so I have a very good record of state sales taxes. In 2015, the IRS tables would give me $3,400 in deductions, while my receipts show over $5,500 (that doesn't include any big ticket items).

Best wishes.
Andy

SittingOnTheFence
Posts: 187
Joined: Sun Sep 27, 2015 5:30 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by SittingOnTheFence » Mon Mar 14, 2016 12:57 am

For years I've been saving receipts and taking the actual amount rather than the table. For me, it's been a significant difference. Usually 50-70% greater than the tax table. Each month I total the taxable receipts, it takes perhaps 15 minutes. The hardest part is bothering to keep the receipt and it's getting harder as more businesses move away from 'cash registers'. Especially at restaurants it is hard to get an itemized receipt showing sales tax. Sometimes I make a hand entry on the credit card slip to show the tax. Not so sure that would pass the IRS smell test.

JBTX
Posts: 1212
Joined: Wed Jul 26, 2017 12:46 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by JBTX » Tue Oct 10, 2017 7:27 pm

Resurrecting this thread, because I have a related question.

I live in TX, where there is no income tax. I take sales tax deduction. In most years I just took the automatic deduction, recognizing it is probably somewhat low but I generally do not save receipts.

One year a few years ago a friend of mine in TX, who is a CPA (although not one that practices preparing taxes), said he just takes his financial details in a spreadsheet, and calculates/estimates his sales tax based upon his financial detail. I don't think he explicitly saved all of his receipts. I actually took this approach one or two years, it did give a somewhat bigger number. I was never audited.

This year we did a home remodel, and I probably have about $40K of incremental sales tax eligible expenses, between appliances $10k, Furniture/Decor $20K, and flooring material $10K. In terms of how the IRS words it, it seems like I can only take the flooring materials as an incremental large expense if i were to use the standard calculations plus large expenditures. Obviously that would be leaving a lot of money on the table.

I have not been saving most receipts. I will have receipts for the remodel expenditures.

I see my options as follows

1. Just take the standard sales tax deduction + flooring amount, and leave a butt load of money on the table. I would probably be leaving about $3000-4000 $ of deductions on the table, which would be approx $800-$1000 in tax savings lost.

2. Compute estimated sales tax based upon my quicken detail - which would probably get me about $5000 in sales tax excluding the remodel, plus another $3200 or so for the remodel = $8,200. Last year when we made marginally more income, the sales tax deduction based upon the standard calc we took was only $3200.

For option 2 obviously there is some audit risk. Perhaps i could go back and see if I can get some of the larger receipts online somehow. That could be quite a project. Anybody tried to tackle this?

Seems to me option 2 there is some audit risk, but probably worth taking. The difference is $8200 vs approx $4000 if used standard calc plus flooring materials.

Anybody have any experience with this?

tomd37
Posts: 2601
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by tomd37 » Tue Oct 10, 2017 8:47 pm

Just a reminder on sales tax deduction. It is my understanding that on a remodeling/renovation job you can take the sales tax deduction for the material purchased only if you purchased the items yourself. You cannot do so if the contractor bought the material and then invoiced you. In that case he paid the sales tax.
Tom D.

JBTX
Posts: 1212
Joined: Wed Jul 26, 2017 12:46 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by JBTX » Tue Oct 10, 2017 9:54 pm

tomd37 wrote:
Tue Oct 10, 2017 8:47 pm
Just a reminder on sales tax deduction. It is my understanding that on a remodeling/renovation job you can take the sales tax deduction for the material purchased only if you purchased the items yourself. You cannot do so if the contractor bought the material and then invoiced you. In that case he paid the sales tax.
viewtopic.php?t=12605

I noticed this post from 2008
DonnaB wrote:
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.

No idea if this would be applicable to my situation.

The contractor in my case is a designer/contractor and runs a bit "loose" in her own procedures. She buys the stuff, pays the taxes on it when purchasing it as if she were the end user, and then invoices us for the whole ball of wax as a pass through. Sales taxes are typically only intended for the end user, and in this case I would be the end user, so I would think since I am paying the tax, I would be eligible for the deduction.

In substance she is acting as an agent, but there is no written agreement to specify either way.

tomd37
Posts: 2601
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by tomd37 » Wed Oct 11, 2017 4:18 pm

When I checked with my state department of revenue I was told unless there was such a statement in your contract, you could not claim the sales tax paid by the contractor. I follow this guideline when doing when doing volunteer tax preparation services unless the contract states such as previously cited by a poster. My general thinking is "Don't mess with the IRS".
Tom D.

JBTX
Posts: 1212
Joined: Wed Jul 26, 2017 12:46 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by JBTX » Wed Oct 11, 2017 4:40 pm

tomd37 wrote:
Wed Oct 11, 2017 4:18 pm
When I checked with my state department of revenue I was told unless there was such a statement in your contract, you could not claim the sales tax paid by the contractor. I follow this guideline when doing when doing volunteer tax preparation services unless the contract states such as previously cited by a poster. My general thinking is "Don't mess with the IRS".
Ok. Thanks for the info. If it were a small amount I’d just let it go but we are talking a tax savings in the ballpark of $1000 or so.

Gill
Posts: 3501
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by Gill » Wed Oct 11, 2017 4:51 pm

I follow the method used by your CPA. You shouldn’t need a receipt for every single item. I use my Quicken record and apply my local tax rate to the total of taxable expenditures. For example, if I spent $1,000 on clothing and the sales tax rate is 7%, divide the total by 1.07 giving you sales tax of $65.42.
Gill

IMO
Posts: 175
Joined: Fri May 05, 2017 6:01 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by IMO » Wed Oct 11, 2017 5:19 pm

JBTX wrote:
Tue Oct 10, 2017 7:27 pm

One year a few years ago a friend of mine in TX, who is a CPA (although not one that practices preparing taxes), said he just takes his financial details in a spreadsheet, and calculates/estimates his sales tax based upon his financial detail. I don't think he explicitly saved all of his receipts. I actually took this approach one or two years, it did give a somewhat bigger number. I was never audited.
I always find it interesting when there is the assumption that because one wasn't audited for something by the IRS that the "result" is that it makes it legitimate. I was told once by a CPA that so long as you fall within a certain range for a particular deduction, that it statistically is very unlikely you will be subject to an audit (just not the resources available). I get your logic and I suspect the only real way to know if it is legitimate if there was a tax court type of case providing clarification. With that said, I can see problems when someone does a lot of online purchases for taxable items (which is quite common nowadays) that he/she did not pay sales tax.

Gill
Posts: 3501
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by Gill » Wed Oct 11, 2017 5:25 pm

IMO wrote:
Wed Oct 11, 2017 5:19 pm
JBTX wrote:
Tue Oct 10, 2017 7:27 pm

One year a few years ago a friend of mine in TX, who is a CPA (although not one that practices preparing taxes), said he just takes his financial details in a spreadsheet, and calculates/estimates his sales tax based upon his financial detail. I don't think he explicitly saved all of his receipts. I actually took this approach one or two years, it did give a somewhat bigger number. I was never audited.
I always find it interesting when there is the assumption that because one wasn't audited for something by the IRS that the "result" is that it makes it legitimate. I was told once by a CPA that so long as you fall within a certain range for a particular deduction, that it statistically is very unlikely you will be subject to an audit (just not the resources available). I get your logic and I suspect the only real way to know if it is legitimate if there was a tax court type of case providing clarification. With that said, I can see problems when someone does a lot of online purchases for taxable items (which is quite common nowadays) that he/she did not pay sales tax.
Experienced tax preparers know what is usually acceptable to the IRS. The tax law is not always as cut and dry as many believe it to be. The IRS will usually accept a reasonable approach. As for the online purchases without sales tax, one should be paying the local use tax on those. :wink:
Gill

JBTX
Posts: 1212
Joined: Wed Jul 26, 2017 12:46 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by JBTX » Wed Oct 11, 2017 6:27 pm

IMO wrote:
Wed Oct 11, 2017 5:19 pm
JBTX wrote:
Tue Oct 10, 2017 7:27 pm

One year a few years ago a friend of mine in TX, who is a CPA (although not one that practices preparing taxes), said he just takes his financial details in a spreadsheet, and calculates/estimates his sales tax based upon his financial detail. I don't think he explicitly saved all of his receipts. I actually took this approach one or two years, it did give a somewhat bigger number. I was never audited.
I always find it interesting when there is the assumption that because one wasn't audited for something by the IRS that the "result" is that it makes it legitimate. I was told once by a CPA that so long as you fall within a certain range for a particular deduction, that it statistically is very unlikely you will be subject to an audit (just not the resources available). I get your logic and I suspect the only real way to know if it is legitimate if there was a tax court type of case providing clarification. With that said, I can see problems when someone does a lot of online purchases for taxable items (which is quite common nowadays) that he/she did not pay sales tax.
I don’t know that it makes it “legitimate” per se. That isnt what is being argued.

Just making up fraudulent charity expenses is one thing. Reporting actual real expenditures, but failing to produce receipts for them is something else. The net result from the IRS may be the same but I think there is a difference in he implicit morality of what is legitimate.

On occasion my wife goes to casino. On rare occasion she wins and gets a 1099. On balances she loses but doesn’t always keep a detailed log of losses. I will always offset the winnings with losses (in itemized deductions even though we may not have a detailed gambling log up to IRS snuff. If we are audited that may be a problem. But the expenses are indeed legit.

In terms of your last paragraph on online purchases that would likely be a state sales tax agency issue and not a federal income tax issue. The good news with amazon is you can download your purchases with a breakout of sales tax.
Last edited by JBTX on Wed Oct 11, 2017 6:37 pm, edited 1 time in total.

JBTX
Posts: 1212
Joined: Wed Jul 26, 2017 12:46 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by JBTX » Wed Oct 11, 2017 6:34 pm

Gill wrote:
Wed Oct 11, 2017 4:51 pm
I follow the method used by your CPA. You shouldn’t need a receipt for every single item. I use my Quicken record and apply my local tax rate to the total of taxable expenditures. For example, if I spent $1,000 on clothing and the sales tax rate is 7%, divide the total by 1.07 giving you sales tax of $65.42.
Gill
Thanks. For the record he isn’t my CPA, Just a friend I worked with who happened to be a CPA. He doesn’t practice public accounting so he isn’t necessarily an expert.

The IRS publication seems pretty clear you should have kept receipts. Now whether an auditor accepts a reasonable substitute methodology remains to be seen.

pshonore
Posts: 5610
Joined: Sun Jun 28, 2009 2:21 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by pshonore » Wed Oct 11, 2017 8:50 pm

JBTX wrote:
Wed Oct 11, 2017 6:34 pm
Gill wrote:
Wed Oct 11, 2017 4:51 pm
I follow the method used by your CPA. You shouldn’t need a receipt for every single item. I use my Quicken record and apply my local tax rate to the total of taxable expenditures. For example, if I spent $1,000 on clothing and the sales tax rate is 7%, divide the total by 1.07 giving you sales tax of $65.42.
Gill
Thanks. For the record he isn’t my CPA, Just a friend I worked with who happened to be a CPA. He doesn’t practice public accounting so he isn’t necessarily an expert.

The IRS publication seems pretty clear you should have kept receipts. Now whether an auditor accepts a reasonable substitute methodology remains to be seen.
I think the IRS position is pretty clear; if you don't want to keep detailed records (with receipts), the use the Sales tax table in the instructions as a reasonable and "safe harbor" estimate.

letsgobobby
Posts: 10478
Joined: Fri Sep 18, 2009 1:10 am

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by letsgobobby » Wed Oct 11, 2017 10:45 pm

JBTX wrote:
Tue Oct 10, 2017 9:54 pm
tomd37 wrote:
Tue Oct 10, 2017 8:47 pm
Just a reminder on sales tax deduction. It is my understanding that on a remodeling/renovation job you can take the sales tax deduction for the material purchased only if you purchased the items yourself. You cannot do so if the contractor bought the material and then invoiced you. In that case he paid the sales tax.
viewtopic.php?t=12605

I noticed this post from 2008
DonnaB wrote:
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.

No idea if this would be applicable to my situation.

The contractor in my case is a designer/contractor and runs a bit "loose" in her own procedures. She buys the stuff, pays the taxes on it when purchasing it as if she were the end user, and then invoices us for the whole ball of wax as a pass through. Sales taxes are typically only intended for the end user, and in this case I would be the end user, so I would think since I am paying the tax, I would be eligible for the deduction.

In substance she is acting as an agent, but there is no written agreement to specify either way.
hmm. I would have thought a travel trailer would have been an acceptable specified item, but it seems like without a motor, it doesn't go (ha ha). a mobile home counts, and certainly many people use travel trailers and fifth wheels as 'mobile homes' but I assume they mean a 'manufactured home'. Yet the Turbo Tax Answer Xchange suggests it would be deductible (by context it sounds like it is a specified item, though it doesn't explicitly state this is in addition to the standard sales tax deduction).

https://ttlc.intuit.com/questions/31334 ... g-a-camper

JBTX
Posts: 1212
Joined: Wed Jul 26, 2017 12:46 pm

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by JBTX » Thu Oct 12, 2017 8:29 am

letsgobobby wrote:
Wed Oct 11, 2017 10:45 pm
JBTX wrote:
Tue Oct 10, 2017 9:54 pm
tomd37 wrote:
Tue Oct 10, 2017 8:47 pm
Just a reminder on sales tax deduction. It is my understanding that on a remodeling/renovation job you can take the sales tax deduction for the material purchased only if you purchased the items yourself. You cannot do so if the contractor bought the material and then invoiced you. In that case he paid the sales tax.
viewtopic.php?t=12605

I noticed this post from 2008
DonnaB wrote:
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.

No idea if this would be applicable to my situation.

The contractor in my case is a designer/contractor and runs a bit "loose" in her own procedures. She buys the stuff, pays the taxes on it when purchasing it as if she were the end user, and then invoices us for the whole ball of wax as a pass through. Sales taxes are typically only intended for the end user, and in this case I would be the end user, so I would think since I am paying the tax, I would be eligible for the deduction.

In substance she is acting as an agent, but there is no written agreement to specify either way.
hmm. I would have thought a travel trailer would have been an acceptable specified item, but it seems like without a motor, it doesn't go (ha ha). a mobile home counts, and certainly many people use travel trailers and fifth wheels as 'mobile homes' but I assume they mean a 'manufactured home'. Yet the Turbo Tax Answer Xchange suggests it would be deductible (by context it sounds like it is a specified item, though it doesn't explicitly state this is in addition to the standard sales tax deduction).

https://ttlc.intuit.com/questions/31334 ... g-a-camper
I would not at all rely on turbo tax exchange as a definitive source. Heck even I have answered some questions on that site.

letsgobobby
Posts: 10478
Joined: Fri Sep 18, 2009 1:10 am

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by letsgobobby » Thu Oct 12, 2017 10:27 am

is there any way to find a definitive answer?

tomd37
Posts: 2601
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by tomd37 » Thu Oct 12, 2017 11:10 am

The 2016 version of IRS Pub 17 (2017 version not yet released), pages 152-153 discusses state and local general sales taxes deductions. Included therein is a definition of motor vehicles. My interpretation of that section and the list therein indicates a motor vehicle is something that actually has a motor. The preceding section on actual expenses indicates to me that if you are using Schedule A and electing to use sales tax based on actual receipts, you could include the sales tax paid on any items purchased subject to certain rate percentages. I caution clients using this method to retain all their receipts in the event they are audited by the IRS. There is yet another section Optional Sales Tax Tables where if using the state and local sales tax tables in the Instructions for Schedule A, your income is your adjusted gross income plus any nontaxable items as reflected therein. My general philosophy is "Don't mess with the IRS".
Tom D.

letsgobobby
Posts: 10478
Joined: Fri Sep 18, 2009 1:10 am

Re: Standard Sales Tax Deduction is Miserly -- here's my way

Post by letsgobobby » Thu Oct 12, 2017 12:09 pm

tomd37 wrote:
Thu Oct 12, 2017 11:10 am
The 2016 version of IRS Pub 17 (2017 version not yet released), pages 152-153 discusses state and local general sales taxes deductions. Included therein is a definition of motor vehicles. My interpretation of that section and the list therein indicates a motor vehicle is something that actually has a motor. The preceding section on actual expenses indicates to me that if you are using Schedule A and electing to use sales tax based on actual receipts, you could include the sales tax paid on any items purchased subject to certain rate percentages. I caution clients using this method to retain all their receipts in the event they are audited by the IRS. There is yet another section Optional Sales Tax Tables where if using the state and local sales tax tables in the Instructions for Schedule A, your income is your adjusted gross income plus any nontaxable items as reflected therein. My general philosophy is "Don't mess with the IRS".
I agree without a motor my trailer doesn't qualify. It will be enough sales tax on its own to exceed my standard allotment, so I'll use that plus whatever other purchases through 2017 that I can validate/justify. We won't have credit card receipts but will have Amazon receipts and a few other pieces of evidence.

Post Reply