If you have the federal Presidents Day holiday off, chances are you're spending some of your free time picking up bargains at the annual February sales.
Yeah, I know. It's kind of sad that we've lumped recognition of all our Commanders in Chief into one long weekend that's appreciated more as a day off from work and/or a reason to shop.
C'est la capitalism.
But at least the shopping might help you save on your taxes next filing season.
The American Taxpayer Relief Act of 2012 (ATRA), also known as the fiscal cliff bill enacted earlier this year, included a provision that continues the itemized state and local sales tax deduction through 2013.
As for this filing season, ATRA also retroactively reauthorized the sales tax deduction for the 2012 tax year.
And since the tax laws of the land are part of a president's purview, there is a tax connection, albeit tenuous, to Presidents Day.
Spending for tax savings: An earlier post examined how the buyer of a new car could benefit at tax-filing time from deducting the sales tax on the vehicle.
But you don't have to make a major purchase to save with the state and
local sales tax deduction., which is today's Daily Tax Tip.
The state and local levies you paid on your
regular day-to-day purchases during the tax year accumulate and count
toward this deduction. And that's what most taxpayers in the nine states that don't collect income tax on wages
use.
However, even state income tax paying folks could save if their
state's income tax rates are low.
How do you know which taxes-paid deduction, income or sales tax, to claim on Schedule A? Compare the two amounts.
Check your W-2 for the amount of state and local income tax you paid last year.
As for sales taxes, if you didn't save all your sales receipts
you can always check the optional standard sales tax tables that the
Internal Revenue Service prepares each year for states in which the
sales tax deduction applies.
That means 46 tables, one each for the District of Columbia and 45 states. Missing are the no-state-sales-tax jurisdictions of Alaska, Delaware,
New Hampshire, Montana and Oregon.
You'll find the tables at the back of the Schedule A instructions. Or you can use the IRS' online sales tax deduction calculator
to get an idea of your deduction amount.
So before you fill out your
1040, do the math to see if the state sales tax is the deduction route
you should take this tax season.
A nod to the original George W.: Although today is popularly called Presidents Day, officially it is George Washington's birthday.
The man known as the father of our country was born on Feb. 22, 1732. When the Uniform Monday Holiday Law took effect in 1968, observance of the original George's birth was shifted to the third Monday in February.
Since another revered president, Abraham Lincoln, also was born this month (Feb. 12, 1809), Presidents Day informally evolved as a way to also honor the Great Emancipator.
And that also gives Presidents Day and taxes yet another connection.
In addition to all his other accomplishments, Lincoln signed into law our first income tax. It was created as a way to help pay for the Civil War.
Taxes, presidents, wars. The more things change, the more they stay the same.
Happy Presidents Day!
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