Sales Tax Deduction Extended to 2006 and 2007
Traditionally, one has looked to claim the cost of state revenue taxes as a deduction on federal taxes in one form or another. recent legislative changes have added sale tax payments into the equation.
Sales Tax Deduction Extended to 2006 and 2007
In 2004, a unique tax code was passed as part of the American Jobs Creation Act of 2004. Within the morass of text, a new tax deduction was created. That deduction allowed habitancy to substitute in the total sales tax they paid while the year in lieu of the state revenue tax when claiming a deduction on their federal tax return.
The sales tax deduction was considered a major help for habitancy living in inescapable states. As you probably know, inescapable states do not gain revenue taxes from their residents including Florida, Nevada, Texas and Wyoming to mention a few. Since no revenue tax was collected, these habitancy missed out on a deduction from their federal return. The sales tax deduction filled that gap.
While the sales tax deduction was a inescapable step, there was one problem. The American Jobs Creation Act was slight in time. Specifically, the deduction could only be claimed for the 2004 and 2005 tax years. Practically speaking, this means it has expired and cannot be claimed on your 2006 taxes. At least, that was everyone's belief.
As the Republican majority was about to be swept out of office, it decided to certainly do some work. No Congressional duration has passed less legislation while its term than the last one. Regardless, one of the steps was to pass the Tax Relief and health Care Act of 2006. One of the provisions in the legislation extended the sales tax deduction straight through the 2007 tax year, to wit, you can claim on this year's tax return and next year.
Unfortunately, Congress procrastinated so long that the prolongation of the deduction does not appear in Irs forms mailed out at the end of the year. The branch is trying to get word out, which is also the point of this article. If you wish to claim the sales tax deduction, you need to get a revised program A for your 1040 form. Alternatively, you can claim it on line 5 of the return and write "St" next to the box. Bet the Irs computers are going to love that!
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