Don't Forget the Tax Basics: Save Your Receipts
NEW YORK (MainStreet) -- The American Taxpayer Relief Act of 2012 extended through this year the option to deduct state and local sales tax instead of state and local income tax if you itemize deductions on Schedule A. This option is especially helpful if you live in a state that does not have an income tax, and, as I have found with my clients, for senior citizens who pay little or no state income tax.
You have two choices for deducting sales tax: the actual amount paid for the year, from your accumulated receipts; or the amount, based on income and family size, taken from an IRS-generated Optional State Sales Tax Table, plus the tax paid on the purchase of "big-ticket" items such as a car, motorcycle, truck, van, recreational vehicle, sport utility vehicle, off-road vehicle, boat, airplane, motor home, home and home building materials, and any sales tax paid on the lease of a motor vehicle.
Here is something you might want to do for 2013.
Have a separate file in your record-keeping system labeled "Sales Tax" and save every supermarket, department store, restaurant, credit card or other receipt that lists the amount of sales tax paid on your purchases.At the end of the year, add up the sales tax from these records, exclusive of the tax paid on the "big-ticket" items listed above, and compare your total with the amount allowed in the Optional Sales Tax Table. If you elect to deduct state and local sales tax on Schedule A use the greater number. You may get a bigger tax deduction by using the tables, but you'll never know unless you save your receipts and compare.
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