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Tax Relief Bill Extends Tennessee's Sales Tax Deduction

Press Release

Location: Washington, DC

Tax Relief Bill Extends Tennessee's Sales Tax Deduction

U.S. Rep. Bart Gordon voted for tax relief legislation that extends Tennesseans' ability to deduct state and local sales taxes from their federal income tax returns and extends tax credits to millions of Americans.

Tax relief legislation approved by the U.S. House of Representatives today (May 21) includes a provision that gives taxpayers the option to claim state and local sales taxes instead of state and local income taxes when they itemize their federal income tax returns for the 2008 calendar year.

"Without the sales tax deduction, Tennesseans would pay more in federal taxes than residents of equal income in states that have an income tax," said Gordon. "We shouldn't be penalized by the IRS for living in a state that doesn't tax income."

In Tennessee, 574,393 families took the sales tax deduction on their 2006 federal income tax returns.

U.S. taxpayers were allowed to deduct either state sales taxes or state income taxes on their federal returns until 1986, when the sales tax deduction was repealed; however, the state income tax deduction remained. Since then, Gordon and other members of Congress from the seven states without income taxes have fought to reinstate the sales tax deduction.

"We need to resolve this issue permanently rather than return to it year after year," said Gordon. "It's only fair for hardworking Tennessee families to have the option of taking the sales tax deduction."

The legislation passed by the House also expands eligibility for the $1,000 refundable child tax credit and provides tax relief to homeowners who do not itemize their deductions by permitting them to deduct up to $700 of property taxes in addition to their standard deduction.

In addition, the bill extends the research and development tax credit to spur American innovation and business investment and allows homeowners to take deductions for improvements to their properties that include solar, wind or geothermal technology.

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