Posted on April 06, 2005 at 17:35:32:
The deduction for state and local sales tax that disappeared in the 1980s is back, if not as generous as it was then. It covers the 2004 and 2005 tax years.
The deduction is most valuable for people in Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming—seven states that do not impose an income tax. For others, it’s a tossup: the sales-tax deduction vs. deducting state income taxe. Itemizers cannot write off both.
How much is the deduction worth? The Internal Revenue Service has created sales tax deduction tables, based on income and family size. In addition, the sales tax for big-ticket items like cars and boats can be included. The tables are found in IRS Publication 600, available online at www.irs.gov.
Beware: the law is not clear as to whether the sales-tax deduction must be added back in when figuring AMT obligations.