08/25 - Sales Tax Deduction Set to Expire
I’ve blogged about this before. Because Washington State does not have a state income tax, we do not have a tax that is recognized as an offset against federal income tax. Over the past few years, Congress has continued with a sales tax deduction offset. It is not a part of the tax code, so it must be presented and approved every few years. Last time (2010) it was done retroactively, which I would guess not having the information until December of a year impacts the spending habits of informed buyers during the previous 11 months.
Besides the deduction table, large purchases such as vehicles and major home improvements get to be deducted outside of the table. According to the Seattle Times, the current sales tax deduction is set to expire at the end of the year.
You can imagine what 9.5% means when someone is doing a $70,000 remodel or better yet, building an $800,000 custom home. I know that our clients are always aware of the potential tax implications. If they are not, I advise them of what I know and suggest they discuss it with their tax professional (as I suggest you do rather than just rely on some contractor’s word).
So here’s your call to action. Contact your Senator (Maria Cantwell and Patty Murray for me)or Representative (Dave Reichert) and let them know that this is a priority to you. We are 1 of 7 states that the current tax code does not recognize (because we have no state income tax). We all know that Congress is looking for ways to increase tax revenue, but does that mean that Washington state residents should pay a greater share than 43 other states when this is allowed to expire?
You have your marching orders. Proceed. And let’s make sure that the Washington resident filing a return in 2013 gets that average reduction of $2100 to their taxable income.