For many residents of Texas, keeping good track of sales tax paid throughout the year usually results in a reduction of federal income tax burden. With the tax law that allows for a sales tax deduction on federal returns in question, however, residents don’t know if they’ll be able to take advantage of the deduction for 2014.
The law must be extended by the United States Congress in order to be valid for 2014 income tax returns. As of late September, the Congress had not made a decision for extension. With representatives on a 2-month break, it could be December or later before a decision is reached, leaving Texans in the dark when it comes to expectations on at least one aspect of federal tax season.
Individuals who have never kept track of how much they spent on state sales tax may not realize the sizable tax savings that has been achieved by some in the past. According to one CPA, the average savings for a family making $100,000 a year could be around $375. That’s based on a sales tax deduction of $1,500.
If the tax law is extended, individuals would need proof of sales tax spent in order to claim the deduction. Receipts or records of purchases, with sales tax noted, can help individuals determine how much of a deduction to claim.
In the meantime, individuals may put off large spending decisions until they know whether the extension will take place. Some families make a choice on expenditures such as large home purchases based on the fact that the spending may be discounted by savings on a later tax bill.
Following changes in tax law is important to stay compliant with federal and state requirements. Understanding how tax law impacts yourself or your business can help you reduce problems with appeals or tax litigation. Sometimes, tax law can become so complex that it’s difficult to maneuver, which is why individuals should not be afraid to seek experienced assistance in understanding and navigating tax waters.
Source: My Fox Lubbock, “Congress adjourns before extending Texas sales tax deduction law” Sep. 30, 2014