Is Your Favorite $8,262 Tax Break Really Going Away?
Lawmakers in Congress have made two separate proposals toward tax reform, with the House of Representatives having released its version in early November and the Senate having followed suit shortly thereafter. The provisions of the two proposals aren't identical, but one thing that they share is the elimination of certain key deductions that individual taxpayers have taken for years. One of the most important of those endangered provisions is the deductibility of state and local income or sales taxes, and the potential loss of those deductions has millions of taxpayers upset, especially in states that have particularly high tax burdens. Here, you'll learn exactly how much people benefit from these deductions and what their loss could mean for typical American taxpayers.
Under current law, you can take money that you pay to your state or local tax authority for income tax as a deduction. Alternatively, you can deduct the sales taxes that you pay, but you can't deduct both income and sales tax.
To determine the exact amount you can deduct, you have to take your actual state and local income tax paid. However, those who claim sales tax have a choice: They can either document their spending and deduct the amount of tax paid, or they can use default tax tables that the IRS provides showing average spending and taxation based on income level and state of residence.
Source: Fool.com
