Tax season seems far away when Christmas carols are playing, but the Internal Revenue Service released tax tables Friday on how much a new deduction may help Washington residents.
Legislation passed by Congress and signed by President Bush this fall restored the right for the state’s taxpayers to deduct at least some of the sales tax they pay from their federal income taxes.
Not everyone will see a larger refund or lower taxes because of the deduction.
It can be taken only by taxpayers who itemize, such as those who have mortgage interest to deduct.
“But for those who already itemize, this is nice, because it’s another deduction,” said Judy Monahan, spokeswoman at the IRS office in Seattle.
Taxpayers have the option of using the standardized deduction tables or saving their receipts throughout the year to tabulate the exact amount of sales tax paid.
For those not up to the hassle of doing that, however, the tables issued Friday show that a family of four with a household income of $40,000 to $50,000 is eligible for an $808 sales tax deduction. A couple with an income of $30,000 to $40,000 can claim a $647 deduction.
Taxpayers who purchase certain large items specified by the IRS, including vehicles, airplanes, boats and home building materials, also will be helped, according to the IRS. The sales tax paid on those items can be added as a deduction to the table-specified amounts.
Scott Hyde, owner of Scott M. Hyde &Co. CPA in Mukilteo, said he expects to be taking the new deduction on the scores of tax forms he will prepare during the next four months.
“Most of my clients are people who itemize, so nearly every one of them will benefit from this deduction,” Hyde said. He added that as someone who itemizes on his personal tax forms, he’ll also be helped by it.
“At least it puts us on a more even plane with people who have a state income tax, which has been deductible all along,” Hyde said.
The state Department of Revenue has estimated the new deduction will save residents and businesses in Washington at least $400 million a year.
This legislation passed this year actually allows taxpayers in any state with both a state income tax and a sales tax to choose which one to deduct. But it mainly benefits those in Washington and six other states that have a sales tax but no state income tax.
The new law is in place for only the 2004 and 2005 tax years. U.S. Sen. Maria Cantwell, D-Washington, who co-sponsored this year’s bill, said she will work next year to make the sales tax deduction permanent.
This is the first year Washington state residents are eligible to deduct sales tax since 1986, when a similar provision was removed from the tax code.
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
