Presidents Day is a federal holiday. Many state employees and private sector workers across the country also get a day off on this third Monday of February.
I hope your shopping spree is successful.
And since we are finally into tax filing season, today's Daily Tax Tip is a reminder not to forget to take advantage this year of the sales taxes you paid in 2013.
Sales or income tax deduction choice: Claiming state and local sales taxes on Schedule A is a no-brainer if you live in one of the five states without a general sales tax -- Alaska, Delaware, Montana, New Hampshire and Oregon.
But choosing to deduct sales taxes instead of state and local income tax you paid also could be worthwhile if your state's income tax rate is low.
Whatever the reason for deducting sales taxes, note that this might be the last year you can do so. The deduction expired at the end of 2013 and must be approved by Congress in order to be available for the 2014 tax year and beyond.
So don't waste this possible last shot at writing off your state's and county's and/or city's levies on last year's purchases.
Actual receipts or table amount: If you kept all of 2013's sales receipts, you can total them for your basic deduction amount. I actually did this one year. Never again.
That year that I added up all my sales receipts, the amount that the IRS had figured was very close to my total. So I recommend going with the tax agency's numbers.
As the image of the Alabama sales tax deduction table at right (click for a larger view) shows, the amount you can deduct is based on your income.
The IRS state sales tax tables are found on pages 14 and 15 of Form 1040 Schedule A instructions.
Check out page 16, too, if you live in Alaska, Arizona, Arkansas, Colorado, Georgia, Illinois, Louisiana, Missouri, New York, North Carolina, South Carolina, Tennessee, Utah, Virginia or West Virginia. The IRS has created additional sales tax tables for certain jurisdictions within those states' borders.
You also can complete the State and Local General Sales Tax Deduction Worksheet (page 5 in the Schedule A instructions or your tax software) or use the IRS' online Sales Tax Deduction Calculator.
Bigger deduction for major purchases: Also don't forget that if you made a major purchase last year, you might be able to add that sales tax amount to your table amount or be sure to include in your total receipts sum.
This option is for what the IRS calls "specified items." These are:
- A motor vehicle, including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van and off-road vehicle;
- An aircraft or boat; and/or
- A home, including a mobile home or prefabricated residence, or a substantial addition to or major renovation of a home.
In all these specified item added sales tax situations, the tax levied must be the same as your state's general sales tax rate.
If you itemize and the sales tax deduction works for you, great. Claim it your 2013 amount this filing season.
2014, too? And stay tuned for news -- I'll let you know as soon as I find out -- on whether the sales tax deduction will be available (along with the other expired tax extenders) to claim on your 2014 return filing on purchases you make this Presidents Day and the other 364 shopping days of the year.
You also might find these items of interest: