Currently, 2013 is the last year individuals will be allowed to deduct sales and use tax on their individual tax return as an itemized deduction. To utilize this deduction, the taxpayer had to make an election to deduct state income taxes, or sales tax depending on which one was greater.
This deduction has been of great use to individual taxpayers in South Dakota because the state has no state income tax, so the taxpayer can always employ this deduction. However, with the current state of Congress and the deduction set to expire at the end of 2013 it may be wise to make a large personal purchase you have been considering sooner rather than later.
In addition, to deducting the full sales tax amount on larger items the IRS also provides a table amount which increases the size of the deduction. For instance, in South Dakota, if you purchase an automobile with sales tax of $4,000 you can deduct that amount plus the amount provided by the IRS table. This deduction is of great use to taxpayers in South Dakota, but it is important to note that if you may face the alternative minimum tax (AMT), you must take care in assuming there is a benefit in claiming the sales and use tax deduction. The AMT does not allow this deduction, and therefore some taxpayers may not see a benefit.
