Sales Tax

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Income or sales tax — you have a choice on your 2016 tax return When you itemize your deductions, you can deduct either state and local income taxes or general state and local sales taxes on your 2016 tax return. But you can't have it both ways — it's one or the other. Typically, you might write off your state and local income taxes. This includes amounts withheld from your paychecks and estimated taxes paid during the year such as quarterly installments for self-employed individuals. If you live in a high-tax state like California or New York, this deduction is often one of the biggest — if not the biggest — on your return. However, there's an alternative that might appeal to some taxpayers. In lieu of state and local income taxes, you can deduct the sales taxes you've paid this year. This option is especially attractive to taxpayers residing in the handful of states that don't impose any state income tax. This alternate deduction for state sales taxes has expired and been reinstated several times in the past. Finally, the Protecting Americans from Tax Hikes (PATH) Act in 2015 made this option a permanent part of the tax code. If you itemize your deductions, there are two ways to deduct sales taxes: • Option 1: Claim the actual amount of sales tax paid during the year. This requires you to keep receipts or other documentation of purchases. • Option 2: Use the state-by-state table provided by the IRS. The deduction is based on your state, your income and the number of exemptions on your tax return. Often, the table amount is lower, but more convenient. But, you can add to this sales tax table calculation by amounts paid for the lease or purchase of a vehicle; the purchase of a boat or aircraft; and the purchase of substantial home additions or renovations. In some cases, the extra tax for these "big-ticket items" may push you to use this as an alternative to the state income tax deduction. Tax season is here. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can schedule appointment, send encrypted data, and receive our newsletters. Regards, Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale/purchase of a business property in excess of $5,000 • Sale or purchase of a residence or other real estate.