Deducting your state and local sales taxes

Seventeen states are holding tax holidays this month. A post with details is in the works, but until I finish it, you can get a preview in the info about the recently-completed Mississippi tax-free event.

For the rest of the year, however, shoppers in 45 states and the District of Columbia pay sales taxes on most products they purchase. Through the end of 2011, those extra pennies, or dollars if you're a big spender, could help reduce your federal income tax bill.

As today's Weekly Tax Tip discusses, if you paid state and local sales taxes, you need to run the math to see if the sales tax deduction is worthwhile.

A few quick points to note.

First, you have to itemize to claim the deduction.

Second, if you pay your state both income and sales taxes, then you have to choose which one you want to claim. For most folks, that will probably be the income taxes, but not always. Double check what your tax bill will be for each claim.

Finally, unless Congress acts, this is the last year this tax break is available.

So if you got an extension to file your 2010 return, be sure to see if the sales tax deduction is worthwhile. Of course, you probably already know, since you had to run at least a rough draft of your return to find out if you owed any money when you asked the IRS to give you until Oct. 17 to file.

But I just wanted to remind you.

And for 2011 tax planning purposes, I wanted to make sure you know that the sales tax write-off is still in effect for this year. Shop accordingly.

Related posts:

• Sales tax, use tax and Internet purchases
• NY eases e-file rule for Amish businesses
• State tax departments

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