Purchase a Boat in 2006? It Could Earn You A Tax Deduction
BY Brandon Bissell
Purchase a Boat in 2006? It Could Earn You A Tax Deduction!
If you purchased a boat in 2006, the sales tax paid could be deductible from your income taxes. The American Jobs Creation Act of 2004 gave taxpayers the option to claim state and local sales taxes instead of state and local income taxes when they itemize deductions. Under the law the option was available for the 2004 and 2005 returns only, but recent legislation has extended the availability of this deduction through 2007.
IRS Publication 600, State and Local General Sales Taxes, helps taxpayers determine their sales tax deduction amount in lieu of saving their receipts throughout the year and deducting the actual amount of their sales taxes. Taxpayers use their income level and number of exemptions to find the sales tax amount for their state. The publication explains how to add an amount for local sales taxes if appropriate.
Because of the late passage of the Tax Relief and Health Care Act of 2006, the IRS was unable to include the sales tax tables in the Form 1040 instructions, as it did last year. Instead, the IRS has posted the tables to this Web site and is mailing 6 million copies of Publication 600, to taxpayers who are receiving a Form 1040 and instruction booklet in the mail.
While this deduction will mainly benefit taxpayers with a state or local sales tax but no income tax -- in Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming -- it may give a larger deduction to any taxpayer who paid more in sales taxes than income taxes. For example, you may have bought a new car, boosting your sales tax total, or claimed tax credits, lowering your state income tax.
Go to the IRS website to get Publication 600, State and Local General Sales Taxes. And of course, speak to your tax advisor to see if you -- and your boat --qualify for this deduction.
ABOUTH THE AUTHORBrandon Bissell is CEO of BoatersBasement and online community for boaters. He is a resident of West Michigan and can often be seen in the summer heading out on his boat on Lake Michigan. |
