SENATOR LISA MURKOWSKI WELCOMES IRS SALES TAX EFFORTS
Release of Alaska-specific local sales tax table to help cut fed tax bills
Senator Lisa Murkowski today welcomed action by the IRS to issue a standard tax table to help many Alaskans take advantage of a tax change passed by Congress last fall, which allows residents who live in communities with local sales taxes, to deduct those taxes from their federal tax bills.
In the JOBS Act (Public Law 108-357) that Congress approved last fall there was a provision to permit residents who pay local sales taxes to deduct them from their federal taxes, just as Americans have been able to deduct state income taxes from their federal tax returns. When the IRS this winter issued their tax backup material for the 2004 return year, no deduction table was issued for Alaskans to use to compute the local sales tax deduction. IRS today rectified that by issuing Publication 600-A that applies specifically to Alaskans who have paid sales taxes at the local and borough level.
"I am pleased that Alaskans can now more easily deduct local sales taxes from our federal returns. The change should help level the tax playing field and should benefit many Alaskans come April 15th," said Senator Murkowski.
While Anchorage residents pay no local sales taxes, residents in Juneau, for example, pay 5%, Kenai and Soldotna residents pay a combined 5% to their cities and boroughs and Ketchikan residents pay a combined rate of 6% in city and borough sales taxes. Under the new tax table, Alaskans who itemize will be able to claim a standard deduction based on their income and their number of exemptions. They can also claim a larger deduction if they have receipts for sales tax payments during the year, such as for cars or boats.
"For Alaskans who have already filed their tax returns, it may be worthwhile for them to compute the tax savings if they live in a community with local sales taxes and file an amended," noted Murkowski.
While the tax savings will be dependent on a host of factors, a family of four that makes $50,000 and already itemizes, living in a community with a 5% sales tax, should receive a deduction of $1,015 - a deduction that would cut their taxes by between $150 and $200 depending on their actual tax bracket.
The form is now available to the public on the IRS internet site, at http://www.irs.gov/pub/irs-pdf/p600a.pdf