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Retired teachers chapter news
Sales tax break for residents of Florida, other states
Federal tax law allows taxpayers who elect to itemize deductions to deduct their state and local income taxes or state and local general sales taxes to reduce their federal income tax.
This law is especially important for residents of states that do not have an income tax, but do have sales taxes; they are: Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Also, any retired teacher who is receiving a New York City pension and is a resident of New York State, who pays little or no state and local income tax, can benefit by this law.
Under this law, individuals who elect to file an itemized federal income tax return for 2010 must file “Schedule A-Itemized Deductions” and complete line 5 “State and local (check only one box): a. Income taxes, or b. General sales taxes.”
By electing “b. General sales taxes” you have two choices. One is actual expenses. You must keep all of your receipts with sales taxes paid in 2010 to use this method. Tally the receipts to determine the total sales taxes paid. Generally you can deduct the total, but the total may have to be reduced for certain items.
The second choice is to use the federal “optional sales tax tables” for 2010. This choice is a calculation requiring no receipts to provide in the event of an audit. The tables are based on your adjusted gross income (2010 Form 1040, line 38) plus nontaxable items such as tax-exempt interest, veterans’ benefits and nontaxable Social Security benefits (see Schedule A instructions for additional items) and the number of exemptions you claim. The tables only represent the allowed state taxes; be sure to add local sales taxes if applicable. For New York City residents, the deduction can be more than double the chart amount; you must complete the worksheet on page A-4 of the “2010 instructions for Schedule A” or use the 2010 Sales Tax Deduction Calculator on the IRS website (www.irs.gov and enter “sales tax deduction calculator” in the search box, then follow the instructions). In addition you may be able to add sales taxes paid on specified items such as a motor vehicle, boat or major home renovation.
Residents living in a state that has both income and sales taxes can deduct whichever is greater, but not both. Be sure to check whether it is better to take the standard or itemized deductions. Be sure to review “Schedule L-Standard Deduction for Certain Filers” for a possible higher standard deduction.
Please read the instructions carefully and/or consult your tax adviser for all tax matters.
Jul 30, 2014
Aug 29, 2014
Sep 6, 2014