State sales tax deductible for '04

Boat/US Magazine, May, 2005

For those who bought a boat last year and paid substantial state and local sales taxes and who may not yet have filed their 2004 federal tax returns, a new deduction is available, but perhaps not for long. Thanks to a new law, taxpayers have the choice of deducting state and local sales taxes or state and local income taxes on their federal returns.

The change was in the American Jobs Creation Act of 2004 and IRS Publication 600 contains the details to help you figure all of this out. To order one, call 1-800-TAX-FORM or go to www.irs.gov to download a copy.

For residents of some states, the tax code change is especially helpful because these states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

The option is scheduled to expire at the end of 2005, however 60 members of Congress have introduced HR 519 to make this change permanent.