One benefit to itemizing deductions on your federal income tax return is that you may deduct any taxes paid. A provision of the tax code allows the taxpayer to deduct either the state sales tax that was paid during 2007, or the state income taxes that was paid in 2007. You may not deduct both amounts of tax. You must decide which of the two amounts of tax that you will deduct.
The Sales Tax Deduction is only applicable for taxpayers who itemize their deductions. Itemizing your deduction involves filling out a Schedule A, Itemized Deductions. Itemizing is only beneficial when your itemized deductions are larger than the standard deduction for your filing status. The standard deduction can range from $5,350 for a single taxpayer to $10,700 for a couple using the Married Filing Jointly filing status.
The amount of sales tax that you can deduct can be determined by using the sales tax deduction calculator found on the IRS website at www.irs.gov. Also, you may claim any sales tax paid on certain ìbig ticket itemsî purchased during the tax year, such as motor vehicles, airplanes, boats, homes or home building materials (such as lumber and piping). Keep in mind however, that even if the sales tax on those items is higher than the standard state sales tax, the IRS will only allow you to deduct the amount of tax paid that equals the lower standard rate. Thus, if new car purchases are taxed at 7 percent, but the standard state tax rate is 5 percent, then you will only be able to claim 5 percent of the carís value.
This option is used primarily by taxpayers who are residents of states that do not have a state income tax. Those states include, but are not limited to, Texas, Florida, Nevada, and Alaska. Since these states have no income tax, utilizing the general sales tax may allow taxpayers from these states to claim a larger deduction. Of course, taxpayers from states with a state income tax may still be better off deducting the sales tax if the sales tax amount is larger than the amount of state income tax that was withheld. However, in most cases, the state income taxes will be greater than the sales tax paid.
If you have questions about the sales tax deduction and whether or not you should choose to take the deduction, you should contact the WRAMC Tax Center, located in Delan Hall (Bldg. 11), Rm. 1-69. ou can sit down with a volunteer tax preparer who can go over all of your tax information and determine if you should claim the sales tax deduction on your 2007 tax return.
To contact the WRAMC Tax Center, call (202) 356-1012, Ext. 41213. The appointment days are Mondays, Wednesdays, and Fridays. Walk-in days are Tuesdays and Thursdays. The WRAMC Tax Center offers free tax preparation and electronic filing for all active duty members, their dependents, and reserve/national guard members on active duty. Tax services for retirees are limited, and are offered on a space available basis once the needs of the active duty members are met.
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