Form 1040 Query

[JDgreen227]

I checked the irs.gov/help website and didn't find the answers to my questions, so I hope the TBN experts can figure this out for me.

For the calender year 2004 filers who itemize deductions on Form 1040 will have a choice of deducting either state and local income taxes, OR state and local sales taxes.

Okay now, since we live in Michigan, I assume that the $3.60 in state sales tax we paid for lodging in Grand Rapids, Mi. last year is deductible. We also paid $3.00 in city/county tax plus a charge of $1.20 for room occupancy tax. Query, since these two additional charges were paid in our home state, would they be considered a local sales tax or not?

We also rented a car in California, paying a sales tax there.
Second query, would this be considered a sales tax which is deductible, even if it was paid outside our home state? There is nowhere in the IRS information, printed nor online, where I can determine if sales tax deductions are restricted to those you paid in the state you reside in.

I know the TBN experts are smarter than the average IRS employee, so I'm asking you instead. THANKS.

 

[texbaylea]

I suspect the IRS is still trying to figure out what the rules are. I understand there will be optional tables of standard amounts as there were in the past. These were used unless you could document actuals.

 

[DUMBDOG]

If you are going to deduct the actual sales tax paid, it would be for all sales tax, instate or out.

 

[Junkman]

You will have to consult the fine print manual and somewhere between page 85 and 367, in paragraph 1 they allow it, and then in paragraph 7 & 8, it is taken away.... then in paragraph 17 subsection A, there is a denial that it was ever granted. Good luck..... that is why CPA's get the big $$$$$ for doing a tax return... besides, it isn't due until April 15th, so why worry about it so early. Be like the rest of us..... driving to the post office to have it postmarked at 5 minutes before midnight..... /forums/images/graemlins/grin.gif

 

[OkeeDon]

Trying to find and document every dime I spent for sales tax would be a logiistical nightmare I don't even want to contemplate. Even if I had plenty of advance warning, I wouldn't bother to try to keep every receipt. Think about sales taxes on hundreds of very small purchases. Think about getting everyone in the family on the program and keeping accurate records.

No matter what, I'n certain that in my case the tables they provide will be more than generous compared to the records I could keep, unless I knew that I had made an extraordinarily large purchase that would put me over the top of the table allowances. What would be perfect would be a table for standard purchases and the ability to add a documented purchase of something out of the ordinary, such as the new motor home we're thinking about.

Of course, living in one of the few (I think it's only 3) states that have no income tax to deduct, I think this new loophole is wonderful!

 

[JDgreen227]

Don,

My spouse and I are retired state employees and therefore pay no state income tax on our pensions, so the new tax loophole is a nice bonus for us. We are also some type of oddball folks who keep every receipt and a copy of all our sales transactions during the year, along with very detailed budgets. According to the tax tables, we can claim about $750 if we use the standard sales tax deduction, but I spent over $10,000 last year on building materials alone and at 6% state sales tax....well, you do the math. We will come out WAY ahead by itemizing. It does irk me that the IRS didn't enact this change sooner in the year 2004, to give more people the opportunity to keep records...but we all know how they operate.

 

[ShaleniFarm]

</font><font color="blue" class="small">( you do the math )</font>
10,000 * .06 = 600.
600 < 750

You'd need another 2500 spent with sales taxes to equal the standard deduction.

Not sure what your definition of </font><font color="blue" class="small">( WAY ahead )</font> is, but I wouldn't track every receipt for < $100. But you are retired, so you have some spare time. /forums/images/graemlins/laugh.gif /forums/images/graemlins/grin.gif

Have a good one,
Neil.

 

[Bird]

</font><font color="blue" class="small">( We are also some type of oddball folks who keep every receipt and a copy of all our sales transactions during the year )</font>

Me, too. /forums/images/graemlins/tongue.gif And like you, the tables look like about a $750 deduction, and just yesterday, I added up receipts for a little better than $1,300 because I bought a used pickup truck last month.