Just one more reason to buy a home in Florida, you may now deduct Florida sales taxes from federal income taxes in 2004 and 2005. The recently-signed American Jobs Creation Act (AJCA) of 2004 resurrected a sales tax deduction last provided to taxpayers back in 1986. Prior to the Act's effective date, taxpayers generally could deduct only income, real estate and certain personal property taxes imposed by their state or locality as an itemized deduction on Schedule A.
This is good news to taxpayers especially those living in a state such as Florida that does not have a state income tax. Taxpayers living in other states may also deduct sales taxes from their federal forms, but they must choose between the sales tax deduction or a deduction for their local and state income taxes however, you cannot deduct both.
In planning to make the most of this provision, taxpayers may want to schedule major purchases simultaneously to ensure itemized deductions exceed the standard deduction for a particular year. Depending on their tax bracket and other issues present in their tax return, taxpayers should also consider whether they should schedule their purchases for 2004 or 2005. In all cases, taxpayers should consult their accountant before making any decisions that could impact their tax payments.
Florida taxpayers may deduct the actual amount of sales taxes paid or, if easier, deduct a standard amount as determined from a table currently being developed by the IRS. Additionally, the taxpayer may start with the table's standard deduction and increase the deduction amount by the level of sales tax paid on some big ticket items, such as a motor vehicle, boat or other large item soon to be defined by the IRS.
Posted by Donald Urschalitz P.A. at November 9, 2004 11:14 AM
