To see more photography by Dave Dugdale, see http://www.learningdslrvideo.com/

 

I was working on a tax return the other day and I called the client to tell him about his refund.  “How did you do it?”  He asked, “When I did it myself on Turbo Tax I owed $600!”

 

Well, to be honest, my first go round on his tax return I showed him owing $600 too.  What I do is go back and look for little tweaks that I may have missed the first time around.  The sales tax deduction is one place to check and you can do this yourself.

 

Most people who live in states with an income tax don’t use the sales tax deduction.  For most people, the income tax deduction is the higher deduction.  But if the sales tax deduction is something you use, you want to know about this.  You need to check for a local sales tax.

 

Let me explain.  Here in Missouri, the state sales tax is 4.225%.  If you’re working in Turbo Tax or just about any other software, it will figure your sales tax deduction based upon the state rate.  What I used to do in the past was go to the department of revenue website and look up the local sales tax rates for each locality and add that to my equation.  Chesterfield, the next suburb over has a 3.7% local sales tax.  You see how that can almost double your sales tax deduction?

 

But it’s even easier to figure your local rate these days with the IRS sales tax deduction calculator.  Here’s a link:  http://apps.irs.gov/app/stdc/

 

It’s so easy to use.  You start with the tax year.  They want your income range, the number of exemptions you’re claiming and if you bought any special items like a car.  Then you’ll have to input your zip code.  My zip code has a couple of different sales tax rates so I’ve got to check that I’m in Maryland Heights, MO so they get the right tax rate.  Then it asks if I’ve moved—because if you move they’ll calculate the sales tax deduction for the two areas.

 

Then you’ll get a chance to check your answers and edit it if you made any typos or anything.   Click continue and it tells you what your sales tax deduction is including your local sales tax rate.  You can print that page out and it will be your back up for the entry that you put in your tax return.

 

Let me give you an example:  I used an income between $100,000 and $120,000 and I used my city, Maryland Heights, Missouri.  If I just use the regular software program—it would give me a sales tax deduction of $776.  By using the IRS calculator, the sales tax deduction is $1,412.  That’s a difference of $636.  For someone in the 25% tax bracket, it would save them $159 in taxes.

 

This little tax trick is not going to give you enormous savings, but it’s not a bad return for 5 minutes of your time.