Taxes have always been one of the biggest headaches for every person. People consider paying taxes as the toughest job however; preparing taxes is harder than anything. Taxpayers always crave for tax saving tips and alternates and the job becomes tougher as the last date approaches to pay income tax. Majority of people get in touch with their friends or relatives to get suggestions and advice to plan their income tax filing. If you really want to save money, you should get information about new tax laws, how you should use them for your benefit. With the new federal tax laws, you can reduce your taxes dramatically. There are several options; you just need to choose the apt one for you. Sales tax is one such option which will help you to save your money.
According to tax reform act of 1986, there will be no deduction for the amount that you pay in sales taxes however, now you can deduct that amount. However the tax relief depends on various circumstances. The state in which you live can also make a great difference. Once you know about the specific tax laws for your state, you can plan your tax return efficiently and effectively. The new tax law allows you to make a choice between state sales tax and sate income tax for the deduction. Whatever your choice is, first you need to itemize your deductions.
Depending on your annual income and state in which you’re residing, IRS provides you a prospect to take deductions from your taxable income that is pre determined. Majority of people go for pre determined deductions since they think it is better than other options. However, other opts for it just because of its simplicity. You don’t need to face much of hassle. Therefore, before jumping on the opportunity you should plan accordingly and pick the option that suits your requirements in best possible way.
You can significantly lower the taxable income with then help of the option of deduction provided in the amount paid in sales tax. If you’re living in Washington, Wyoming, Florida, South Dakota, Nevada, Texas or Tennessee the plays vital role in your tax return because there is no state income tax in these states. If you go by old tax laws, in above mentioned states, you are not entitled to claim any kind of state tax deductions. However, the new rules allow the residents of any of these states to claim state sales tax and reduce their tax amount. If you buy any luxurious items, car or a boat, you should consider sales tax deduction as the sales you paid could be higher than you paid in state income taxes.
You should start your tax planning as early as possible if you want manage your finances without any flaws. You should save all the receipts because once you declare your deductions you would need to show the receipt as a proof that you’ve paid sales tax.