Volume 2 Number 4
January 24, 2005










TEXT VERSION

 


FEDERAL INCOME TAX DEDUCTION TO CONSIDER FOR 2004 TAX RETURNS

Good news for Floridians is the restoration of the federal deduction
for state and local sales tax that was eliminated in 1986. As you collect your papers and update your books in preparation for your 2004 tax filing, there is a new federal law to take into account.

Thanks to a multibillion-dollar corporate tax bill, Florida's individual
taxpayers are getting a tax break that is in effect for 2004 and 2005
tax returns.

In the midst of the 633-page American Jobs Creation Bill of 2004,
approved by Congress and signed into law by the president, is the
okay for consumers to deduct sales taxes from their federal filings.
Across the nation, taxpayers must decide whether to deduct the
sales taxes paid or state income tax amounts. The choice is
easy for residents in the seven states that do not collect state
income taxes but do levy state sales taxes: Florida, Nevada,
South Dakota, Tennessee, Texas, Washington and Wyoming.

Advocates of reinstating the sales tax deduction say the tax code
has been unfair to states without income taxes because it allows
taxpayers in 41 states to reduce their federal tax burden by
deducting state and local income taxes. Alaska and New
Hampshire don't have sales or income taxes.

The deduction is an addition to Schedule A, Itemized Deductions.
IRS will provide optional tables for use in determining the deduction
amount because most taxpayers don't keep records of the sales
taxes they pay. The table estimates are based upon: 1) state of
residence; 2) income; and, 3) number of exemptions. A worksheet
is also provided to make adjustments to the base estimate for
purchases of vehicles, homes, and home building materials.

If you do keep receipts for your purchases, you can use the actual amount paid in tax, with some limits, rather than the amount from the IRS table.

Remember - the key to financial security is knowledge. Visit the Your Money, Your Life web site http://www.yourmoneyyourlife.org/ for more financial tips.

Our masthead for January is a view of the County Courthouse located downtown in beautiful Madison County, Florida.