Hi,
I am a resident of WA state. As a state with no personal income tax, I am allowed to deduct sales tax payments under my 2005 itemized deductions in lieu of state income tax, under the American Job Creation Act.
We bought (actually signed a contract for building) a new house in Aug 2005, for $301K. I understand that the sales tax on the house purchase is tax deductible, in addition to the standard table lookup value.
My question is: how much of the tax is deductible? The total sales tax is in excess of $20,000- is that entire amount deductible? The IRS and the Wash State Dept of Revenue have examples of automobile purchases, where the $1600 tax on a $20,000 automobile would be fully deductible. It's hard for me to believe that I have a $20,000 deduction, and save $3000 on my tax bill!!!
Second question- is the sales tax based on the purchase value of the house? Or the identified cost of building materials (excl. labor and contractor fee)?
I know WA is one of several states w/o income tax that qualify for this deduction, so I'm hoping someone out there is knowledgeable. TaxACT (my software) has no been no help!
Thanks in advance!!
I am a resident of WA state. As a state with no personal income tax, I am allowed to deduct sales tax payments under my 2005 itemized deductions in lieu of state income tax, under the American Job Creation Act.
We bought (actually signed a contract for building) a new house in Aug 2005, for $301K. I understand that the sales tax on the house purchase is tax deductible, in addition to the standard table lookup value.
My question is: how much of the tax is deductible? The total sales tax is in excess of $20,000- is that entire amount deductible? The IRS and the Wash State Dept of Revenue have examples of automobile purchases, where the $1600 tax on a $20,000 automobile would be fully deductible. It's hard for me to believe that I have a $20,000 deduction, and save $3000 on my tax bill!!!
Second question- is the sales tax based on the purchase value of the house? Or the identified cost of building materials (excl. labor and contractor fee)?
I know WA is one of several states w/o income tax that qualify for this deduction, so I'm hoping someone out there is knowledgeable. TaxACT (my software) has no been no help!
Thanks in advance!!