I originally sent this article before Christmas and need to add something.
The IRS table for the sales tax deduction only includes the STATE portion of
the sales tax (7%).  You can ALSO deduct the local county/city portion of
sales tax (2.25%) so that you get to deduct the full 9.25% (Hamilton
County/City of Chattanooga) sales tax amount.  

 

The IRS circular has a worksheet to figure out the local sales tax amount.
You can use that worksheet or the formula with example I devised below.  For
my example, you get the same amount with my calculation or using the IRS
worksheet.

 

You will have to do a slight algebraic formula such as:   x = the table's
sale tax deduction amount for the appropriate income level and # of
exemptions divided by .07 to figure out the gross sales amount used.  Then
multiply .0225 times that gross sales amount ("x" that you calculated above)
to add to the table's deduction amount for your total itemized deduction
amount.

 

Example:  For a Tennessee taxpayer with $25,000 and 2 exemptions, the sales
tax deduction is $745.

 

x = $745 divided by .07

x = $10,642.86 Gross sales amount

 

Now multiply the local sales tax rate:  

$10,642.86 times .0225

= $239.46

 

Total deduction = 745 + 239 = $984

 

I hope this isn't too confusing. Call someone in the Math department if you
need additional help.

 

Julie

 

Sales Tax Tables Now Available To Outline Taxpayer Savings
posted December 21, 2004 on chattanoogan.com

WASHINGTON, D.C. - As a result of a new law giving Tennesseans the option to
deduct their sales tax, the Internal Revenue Service (IRS) has released a
table to help taxpayers calculate their deductions. 

The "Optional Sales Tax Tables" were released last Friday by the IRS for
taxpayers to use to calculate their sales tax deduction from their 2004
federal tax returns. The tables give taxpayers a sales tax deduction amount
as an alternative to saving their receipts throughout the year and
calculating the amount they actually paid. Taxpayers who itemize can now add
the state sales taxes they pay to their deductions. The tables provide
specific deduction totals based on a taxpayer's income bracket and number of
deductions. In addition, if a family purchased a car, recreational vehicle,
truck or other motor vehicle, they would be able to deduct sales taxes paid
on these purchases from their taxable income on top of the deduction listed
in the table.

"Well over half a million Tennessee families file itemized tax returns and
as a result of this new law, this year they will begin to see greater
savings," said Frist. "A Tennessee family of four making $45,000 a year can
now deduct an additional $1,000 from their taxable income. This represents
real savings put back in the pockets of Tennessee families. I'm pleased we
were able to correct this inequity in the tax code which for too long has
penalized Tennessee taxpayers. Since coming to the United States Senate,
this was an issue that I fought hard to correct. I'm pleased that with the
help of Lamar Alexander and other members of the Tennessee delegation we
were successful this year in giving Tennessee families additional tax
relief."

On October 22, 2004, President Bush signed the "American Jobs Creation Act
of 2004." This bill amended our nation's tax code to enable citizens to
deduct state sales tax from their federal taxes. For nearly 20 years
taxpayers in states like Tennessee that raise revenue through a state sales
tax have been unable to deduct the sales taxes they have paid. Alaska,
Florida, Nevada, South Dakota, Texas, Washington and Wyoming join Tennessee
in benefiting from this change in the tax code.

As Senate Majority Leader, Senator Frist worked hard to ensure that the
state sales tax deductibility issue was a priority in the 108th Congress. 

The IRS table can be viewed on Senator Frist's website at
www.frist.senate.gov.