How can I use the State and local sales tax deduction.

Despite being one of the more popular tax breaks, the deduction for state and local sales taxes is not permanent and is set to expire at the end of 2007. The American Jobs Creations Act of 2004 gave taxpayers who itemize deductions the option of claiming either state and local income taxes or state and local general sales taxes.

If you have been contemplating the purchase of a big-ticket item, such as a car or boat, you should consider making it sooner rather than later because the deduction for state and local general sales taxes expires at the end of 2007.

However, you first need to compute what any potential state and local income tax deductions will amount to and then compare it to your potential sales tax deduction.


Answer Provided by Andrew Taylor, CPA Haffley,Taylor& Company