Can credit cards help reduce IRS taxes?
How to Estimate Sales Tax paid during 2008
I used to be annoyed
at that year-end summary the credit card company sent. What
was this, anyway? A grim reminder of all the things I’d
spent money on in 365 days. Or a tidy 5-page summary of my
life for the past year. However, last year I figured out
just how valuable the Year-end Summary (YES) can truly be.
I’m not an accountant or a CPA, and I’m not telling you what
to do with your YES. But since I’m an engineer, I understand
algebra. Here’s how those of you who itemize can estimate
sales taxes paid during 2008 -- especially easy to do if
your credit card company lets you view each purchase in a
spreadsheet.
To estimate sales tax on merchandise, deduct all items
purchased out of state and/or purchased online (except I see
iTunes now charges sales tax). Take the remaining total,
divide by (1+sales tax rate) then multiply by the sales tax
rate. I live in the Houston, Texas and our tax rate is 8.25%
or 0.0825. So for every $1,000 spent, I paid $76.21 in sales
tax ($76.21 = $1,000 / (1+.0825) x 0.0825).
For restaurants, I assume we never paid more than 20% tip on
the total bill, which includes sales tax. So conservatively
I estimate sales tax by knocking 20% off and then using the
merchandise calculation above. For example, $100 restaurant
expenditure results in a $6.35 sales tax estimate ($6.35 =
($100 / 1.2) / 1.0825 x 0.0825).
Car repairs, car rentals and hotels? Well, you just have to
have the receipts, find the tax, and add it up. You can see how these daily expenditures can be
converted into a material deduction to reduce your federal
tax burden…of course, check that out with your CPA since
this is just one engineer’s opinion. Happy calculating!
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mover, a 3 lb tool that can move up to 500 lbs on concrete –
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