New Math for Tax Deductions

But if you're in Alaska, this new law doesn't help you much. Not only is there no state tax in Alaska, there is no state sales tax either, says Jackie Perlman, a senior tax research analyst at H&R Block. There's a local sales tax for folks in a few cities, so some may benefit.

Some retirees may benefit, regardless of where they reside. That's because most states exempt pension income from state taxes, says William E. Massey, a senior tax analyst at RIA, a Thomson business providing tax information and software to tax professionals. So if they don't pay state tax on pension income, their state tax bill might be fairly low. But if they're spending money in their golden years, then their sales-tax-paid number could be higher.

So you now have another reason to keep everyday receipts -- not that it will help you for 2004 tax purposes, unless you bought big-ticket items such as an engagement ring or furniture or put in a media room and stocked it with equipment.

Since the tax law was passed retroactively, the IRS created Publication 600 -- Optional State Sales Tax Tables to help. These tables take into account things like your filing status and the number of exemptions you claim and offer a best guess of what someone in your tax position would probably have spent on sales tax. You'll have to do a quick calculation, but then you'll have an estimated sales-tax-paid number.

Keep in mind, these charts do not take into account big purchases like cars, boats, airplanes or homebuilding equipment. You can add the sales tax from those items on to your number from the IRS chart.

So if you bought a new car in 2004, add on that sales tax. Or if you put an addition on your house and bought all the materials yourself, as long as you have the receipts, you can also add that sales tax on, says Logan.