Itemized deductions - taxes

Moving down the list of itemized deductions our next topic is deductible taxes. Deductible taxes include:

1. State, local or foreign real property taxes,
2. State or local personal property taxes,
3. State, local or foreign income, war profits or excess profits taxes,
4. Generation-skipping transfer tax imposed on income distributions,
5. State and local general sales tax (in liew of state and local income tax),
6. State or local sales taxes on the purchase of new automobiles, boats, aircraft and other special items.

As an individual taxpayer you are considered a cash basis taxpayer and as such these taxes are only deductible in the year you actually pay them. Additionally there are special rules for the deduction for the sales tax imposed on new motor vehicles. Only sales tax on the first $49,500 of the purchase price is allowed and only on vehicles whose gross vehicle weight is less than 8500 pounds. Also the deduction begins to phase out for a taxpayer whose adjusted gross income is over $125,000 ($250,000 for marrieds). When figuring you sales tax deduction using the IRS - provided table remember to add a proporionate share of local sales taxes to the total since the table only uses the state rate in their calculation. Next itemized installment will be on deductible interest.