If you itemize deductions, you can deduct either the state income tax or sales tax paid on your federal income tax return. For most people, the state income tax will likely be the larger amount of the two unless you made a large purchase (e.g. car, boat etc). But what if you're lucky enough to live in one of the great states without income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming)? Well then the sales tax deduction becomes a no-brainer! Let me show you how I keep track of my sales tax using Mint.com.
The Easy Way...
Let's face it, keeping records is an annoying task. So if you don't feel like tracking every penny like a maniac, the IRS has the solution for you - the Sales Tax Deduction Calculator. Simply answer a few questions about your income level and living situation and it will spit out a pre-determined deduction allowed for your given financial situation.
If you're still reading...
That means you are committed to maximum tax savings. Let me share with you how I keep track of my sales tax paid. To start, you'll need 2 things:
- A smartphone. (Who doesn't have a smartphone?!)
- A mint.com account. It's free. No I don't get paid if you sign up for an account, I'm just a big fan.
First, take a picture of your receipt for record keeping. I actually have a "Receipts" album set up in my iPhone's Photos app specifically for this purpose. Now as a low-income medical trainee, your audit risk is very low. But you will start to appear on Uncle Sam's tax radar pretty soon so it's worthwhile to get in the habit of keeping records.
Next, set up a mint.com account and download the iPhone/Android app for your smartphone. Once you connect your accounts, your spending transactions will automatically sync to mint from your bank and credit card accounts. From there it gets easy. I will demonstrate using the following example when I ate at Tako Cheena:
At the end of the year, you can simply search for the category of "Sales Tax" in mint.com to get an easy tally of how much sales tax you've paid. If that number is larger than the one the IRS Sales Tax Deduction Calculator spits out, go with the larger number when filing your taxes.
This may sound a little OCD. But if you made some large purchases during the year, this may help you save on the April tax bill.
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