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George Saenz, the Bankrate.com Tax Talk columnist Claiming the sales tax deduction

Dear Tax Talk,
I know the sales tax deduction was extended by Congress before the end of the year, but there is no place on the 2006 Schedule A to claim the deduction. Does the IRS not want us to deduct the sales taxes?
-- Brad

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Dear Brad,
Although Congress was working late in the year to grant tax deductions, the IRS had already issued its 2006 tax forms. Once the forms are final they are put out to computer programmers who have the enormous task of translating the forms into computer code not only for the IRS but also for all the tax programs that are available to the public and tax professionals. But since the law was extended, the IRS obviously has to allow taxpayers the deduction.

The option to deduct state and local general sales taxes is available to all taxpayers regardless of where they live, though it's primarily designed to benefit residents of the eight states without state and local income taxes. The deduction will be claimed on Schedule A (Form 1040), line 5, "State and local income taxes." Enter "ST" on the dotted line to the left of line 5 to indicate you are claiming the general sales tax deduction instead of the deduction for state and local income tax.

According to the IRS, there were approximately 11 million tax returns in 2005 that claimed the sales tax deduction instead of the state income tax deduction. IRS began accepting electronic filing of federal returns claiming the sales tax deduction on Feb. 3. See IR-2007-03 for more information on the extended tax benefits for teacher classroom expenses and the tuition and fees deduction. All three deductions were extended through the 2007 tax year.

To ask a question on Tax Talk, go to the "Ask the Experts" page and select "taxes" as the topic.

Bankrate.com's corrections policy -- Posted: Feb. 14, 2007
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