Any day now my credit card statements will show up tallying my oh-so-generous holiday spending. But I'm not going to let those bills get me down and I challenge you to do the same, more especially because a recently enacted law gives Americans the option of deducting sale taxes paid in 2004. Yes, it's that time of year again: Most of your tax forms are required to be mailed to you by the end of January, so many of you will have what you need to get your 2004 tax return filed in a few weeks. And since last year, more than 101 million people got refunds averaging $2,126, according to Kevin McKeon of the IRS, the odds are good. Even better, if you file your return electronically, that refund will show up in your bank account within 10 days (I've gotten mine in as fast as five!). So let Uncle Sam help you pay off your bigheartedness. And while President Bush's re-election didn't create a ton of tax breaks for 2004, there were a few items that could affect your tax return this filing season.
Sales Tax Deduction
The biggest issue -- and most likely the most complicated one this season -- will be the new sales tax deduction. Thanks to the American Jobs Creation Bill of 2004, taxpayers now have a choice to deduct on their federal return either their state and local income taxes or the sales taxes they've paid throughout the year. This option is only available on 2004 and 2005 tax returns. Here's how it works. In previous years, you would typically just drop the amount of the state and local income taxes you paid for that year on line 5 of your Schedule A -- Itemized Deductions. That, along with your other deductions, like mortgage interest paid and charitable contributions, would hopefully bring your tax bill down.