While this might not apply to all of you, the IRS JUST released the final rules on deducting sales tax as part of your itemized deductions. For those interested, it is Publication 600 at the IRS site (www.irs.gov). You are allowed to deduct EITHER your state income tax OR your state sales tax - which ever is larger.

This is especially helpful for people in states without income tax (like Washington) and those in states with lower tax rates (not sure any there are any of these). Given the size of the tax you might pay for the larger rigs, it could be that your sales tax will be larger than your income tax.

The Publication includes a schedule for those not demented enough to keep track of their purchaes. Truthfully, the amount seems low, but can be increased if you pay both a state and local tax rate (like Washington).

IN ADDITION to the table amount, you get to deduct sales tax paid on motor vehicles. In shocking news, they defined this relatively broadly - car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle.

For those of us that have purchased this year or possibly next year, this could save you some really $$. (The rules are set to expire at the end of 2005, but they may be extended.)

 

Thanks. Was looking for Pub. 600 just this last week.

Bought 3 cars this year. Lots of sales tax deductions.

 

I had heard about this, but the rules were not finalized yet.

This is good news to help kick-start the economy.

 

One more thing, if your state is like Washington and charges a higher tax rate on new car purchases than your normal tax, you can't deduct this "extra" amount. Of course, if it charges less than your normal rate, you can only deduct the lower amount.

The IRS takes, but it doesn't give.