TITLE

The New Sales Tax Election: More Complicated Than It Looks

AUTHOR(S)
Gardner, Randy; Welch, Julie
PUB. DATE
February 2005
SOURCE
Journal of Financial Planning;Feb2005, Vol. 18 Issue 2, p28
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This article addresses issues concerning the provisions added by the American Jobs Creation Act of 2004 in the U.S. Of the provisions added, the change likely to give the most taxpayers pause is the election to deduct either state and local income taxes or state and local general sales taxes as an itemized deduction for 2004 and 2005. The provision was added primarily to benefit taxpayers who live in states that do not have a state income tax. But the election is available for all taxpayers. On the surface, the choice looks like the selection of the larger of two numbers, but there are numerous complicating factors and open questions that make the calculation of these numbers difficult. Determining the state and local income-tax amount requires adding all state and local taxes. The most common state and local income-tax payments include withholdings from W-2 wages, estimated tax payments made between January 1 and December 31, the balance due on prior-year state and local income-tax returns. In California, New Jersey, New York, and Rhode Island, mandatory contributions to the state disability fund also count as state and local income-tax payments. The general sales tax is either an amount from U.S. Internal Revenue service (IRS)-generated tables plus, if any, the amount of general sales taxes paid for the purchase of a motor vehicle, boat, or other items as prescribed by the secretary of the Treasury; or the total of actual general sales taxes paid as substantiated by accumulated receipts.
ACCESSION #
15993319

 

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