Monday, October 14, 2013

Using credit card statements to tally sales taxes

George SaenzDear Tax Talk,
Can one's credit card statements be used in place of receipts for calculating the sales tax deduction allowed for 2004 and 2005? It is easy to eliminate purchases that were not taxed, such as food and gasoline. We live in Washington and the amount allotted by tables is trivial compared to what we spent. We are retired, gross about $120,000 and are allowed slightly over $1,000 for deduction by tables. At 8-plus percent state sales tax, that is laughable.
-- Mary
Dear Mary,
If people had known in January that the law was going to allow a deduction for sales tax, maybe they would have had everyone in the family saving their receipts. Since the law changed in November, it's not likely that most people can use their actual receipts.
The Internal Revenue Service tables do seem a little skimpy on the deduction. For example, in Florida a family of three earning more than $200,000 can claim a deduction of $1,792; at the general sales tax rate of 6 percent, this translates into $30,000 in taxable purchases or around $2,500 a month in taxable purchases. Depending on your household habits, this may not be representative, as you believe in your case.
You can certainly look at your credit card statements as a guide to see how much you spend monthly on taxable purchases. If you think you can work out a reasonable basis for using your credit card statements to arrive at the deduction, I don't see why this wouldn't stand ground upon examination.
In determining the amount of sales tax that you can deduct on actual purchases, you only count those items that are taxed at the general sales tax rate for your area (including any local sales tax). For example, many states impose a sales tax at a higher rate on communications such as mobile phones. This is not a general sales tax, as it does not apply to a broad range of products at a similar rate.
However, if the sales tax is imposed at a higher rate on a motor vehicle than the general rate, you can deduct the tax up to the amount of the general rate. For example, if your sales tax rate is 7 percent on most purchases, but a car is taxed at 8 percent, you can claim a deduction equal to 7 percent.
Conversely, if cellular services are taxed at 9 percent, it is not considered a general sales tax and no deduction is allowed for the tax paid on your cellular service (unless it's a business deduction).

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