Shopping can Get Costlier

Last updated on November 26, 2012

Habitual shoppers can feel the pinch of losing federal deduction for state and local state taxes. This Christmas, shoppers can enjoy the benefits of the tax break, but starting Jan 1st, 2013, sales tax deduction expires. Worse news is that apart from this deduction, more are in line. Beginning next year, the country will see more in taxes.

Deductions for state and local state taxes were introduced because the taxpayers of seven states who don’t have a state income tax were complaining that they could take a federal deduction for the state income taxes they paid, but could not take the same deduction on their federal returns for sales taxes. Texas and Florida do not have state income taxes, but have sales taxes.

During the tax break, taxpayers could calculate their deduction either of the entire year or use the IRS calculator to calculate their deduction based on their income. If they chose to use the former method, they needed to keep all receipts and keep track of all their purchases and expenditures throughout the year.

With the new year, the tax breaks being enjoyed by taxpayers will expire, leading to more taxes. For those who love to shop, paying more taxes will hurt in the coming year. This is just the tip of the iceberg. With many tax breaks expiring by the end of this year and new ones planning to be placed, taxpayers will find them giving more to the country.