Press Room
16 October | 2004
Sales Tax Deduction Nears
By David Sedore, Palm Beach Post Staff Writer

About $300. That's how much the sales tax deduction that just passed Congress will save the average Floridian in federal income taxes if it becomes law.

Congress included the exemption as part of a massive tax bill that has passed both the House and Senate. It allows residents of seven states, including Florida, to deduct the amount of sales tax they pay from their federal income tax. President Bush is expected to sign the bill, which received bipartisan support.

"It's going to help everybody," said Dave Ralicki, a senior partner in the Stuart office of Rachlin, the regional accounting firm. "Every little bit of deduction helps."

The deduction is intended to put Florida and the six other states on equal footing with the rest of the nation, where taxpayers can write off the state income tax they pay from their federal tab. Florida and the others do not have an income tax.

It's a two-year deal, effective only for 2004 and 2005.

To qualify for the write-off:

Taxpayers will have to be legal residents of Florida or one of the other six states. "If you're a resident of New York, you're already taking a deduction for state income tax," Ralicki said.

Taxpayers will have to itemize rather than take the standard deduction. For returns filed in 2004, you had to have at least $4,850 in deductions for a single filer, $9,700 for a couple.

Save the receipts from each purchase, add up the tax paid and fill in the number on the appropriate line.

Not a pack rat? No problem. The Internal Revenue Service will provide tables that match your taxable income with the amount of sales tax you've likely paid during the year.

"There are those who are very precise and will collect every receipt," Ralicki said. "Others aren't going to put up with it and they'll use the tables."

Bought a big-ticket item, a car, say, or a new boat? You can add the sales tax for that transaction with the amount in the table.

Sales tax paid on out-of-state purchases also can be deducted.

Economists for the Florida Department of Revenue have calculated how much the deduction should put in the pockets of state residents.

"Generally speaking, we think $300 will be the average savings," said department spokesman Dave Bruns.

The IRS is working on the tax tables for each state but they're not completed.

"We're trying to get them them done as quickly as possible," said Tara Bradshaw of the U.S. Treasury Department. "But we don't know when we'll get them done."

Ralicki has a warning for some taxpayers: The deduction could put them at risk to pay the alternative minimum tax. But as a whole, he says the deduction should help, especially lower-income taxpayers.