Transcripts

Kevin McCormally's Tax Tips-Making Sales Tax Pay Off

SUSIE GHARIB: If you`ve been putting off doing your Federal income tax return, we have two words of advice: hurry up. Your tax forms are due in Uncle Sam`s hands in a week from today, Monday, April 17 since the usual April 15 date falls on Saturday this year. Every night this week, we`ll have a different tip on getting the paperwork done. Tonight, don`t miss the deduction for state sales tax. Here`s Kevin McCormally, editorial director of "Kiplinger`s Personal Finance."

KEVIN MCCORMALLY, EDITORIAL DIR., "KIPLINGER`S PERSONAL FINANCE": Here`s a twist on that old if a tree falls in a forest riddle. If Congress passes a tax break but you don`t hear about it, does it matter? That`s a pertinent question for more than one million taxpayers who could have claimed the state sales tax deduction last year, but failed to do so. The sales tax deduction may have been overlooked so frequently because it was new in 2004, and because it`s not available to everyone.

First, to benefit you must itemize deductions. Second, you have to choose between deducting sales taxes or state income taxes. And for most of us who live in a state with an income tax, the income tax deduction is a better deal. But for residents of Nevada, Texas, Florida, Washington and other states that don`t have an income tax, well, claiming the sales tax deduction is a no- brainer. Still, nearly half of the eligible taxpayers who failed to claim the deduction last year live in no-income tax states.

Don`t join the victims this year, and don`t worry if you haven`t been saving receipts. The IRS has a handy-dandy table that sets allowable deductions based on where you live. A family of five with a $50,000 income in Florida, for example, can deduct about $800. And if you bought a car, boat or other big-ticket item, you can add the tax on that to the table amount, and save even more. Even if you live in a state with an income tax, check the table amounts to see how it compares to your income tax write-off. Finally, if you missed the state sales tax deduction when you filed your 2004 return, there`s still time to file an amended return and claim the benefit retroactively. I`m Kevin McCormally.