Wayne Z
Favorite Answer
Maybe.
If you itemize, you are given the choice of deducting the state sales tax that you paid throughout the year or the state income tax you paid but not both.
The IRS has developed tables to calculate what the average person spends in each state on sales tax. Take this number, and how much tax you paid on the car and if that number is higher than your state income tax AND you itemize, you will get a deduction.
yamahaman
The answer from zudmelrose is correct. The sales tax deduction expired at the end of 2005, but Congress just this past week reinstated and extended it (along with other measures) for this year. President Bush just signed it.
The change came after all the 2006 forms had been printed. The IRS is not going to change the forms but will issue instructions on how to claim it.
If you live in a state with no income tax (Florida or Texas to name two), and you can itemize deductions, you would be wise to include the sales tax.
However, if you live in a state with an income tax (most of them), then you need to compare the higher of the amount of state income tax you paid and the standard sales tax deduction plus the sales tax on the car. Again, only if it is to your benefit to itemize deductions.
?
Income taxes (state) have always been deductible. For the last few years, you have been given the choice between claiming state/local income taxes or sales taxes - but not both. This usually works out when you have purchased a big ticket item such as a new car. However, in order to get the deduction, you have to itemize.
zudmelrose
Wayne Z's answer is the most accurate. Congress reestablished the sales tax deduction in late legislation in December. President Bush recently signed it. You can itemize the greater of your sales tax or state income tax. As mentioned there is a generic table based on your gross income. To that you can add the sales tax paid for major purchases such as automobiles.
The legislation was passed so late in the process, the 2006 IRS forms will NOT have the deduction listed. Check the IRS' website for more info.
Anonymous
if you live in a state with no income tax yes ( or if for business use )
no income tax states have a sales tax deduction when you itemize or a standard deduction if you don't ( for a business it counts as an expense )