Tax Planning
For the last several years, taxpayers have been allowed to take an itemized deduction for state and local sales taxes in lieu of state and local income taxes. The American Taxpayer Relief Act of 2012 has extended this break — but only through 2013.
The break can be valuable to those residing in states with no or low income tax rates. But wherever you live, it can be a powerful tax saver if you purchase a major item, such as a car or boat.
With tax reform being discussed and the federal deficit continuing to be a major issue, it’s hard to predict whether the deduction will be extended again. If you’re contemplating a major purchase, you may want to make it in 2013 to ensure the sales tax deduction is available.