The Year Will End with the Ending of Many Tax Breaks

Last updated on November 28, 2012

The many tax breaks that American taxpayers had been enjoying for some years now are soon to expire. One of the major tax breaks that will end with 2012 is sales tax deduction, i.e. if it is not renewed. With the economy in trouble, there is little likelihood of the expiring tax breaks to be renewed. For taxpayers, it means paying more to the IRS starting next year.

Why the deduction came into being in the first place is an interesting read. Sales tax deduction was a result of the complaints by thousands of taxpayers in seven states where they don’t have state income tax. Before the new law, taxpayers in these states were entitled to a federal deduction for state income taxes they paid, but did not enjoy the deduction on their federal returns for sales taxes. That was unfair on these states which included Florida and Texas. These states do not have state income taxes, but have sales taxes.

Now that the deduction is soon to end, shoppers will be paying more taxes to the government on their purchases starting Jan 1st, 2013. That is not good news, but if the economy can slowly recover due to the many changes in tax laws, it will be worth the trouble.

Expiring of sales tax deduction along with other tax breaks will make a big difference to the amount of taxes everybody pays. With the talk on increasing taxes on the rich and the fiscal cliff that is to be avoided, the new year will see major changes in taxes.