Greetings,

Just a reminder before the tax tip that you can also get some great information off my website. The tax tip of the week will change on Monday, but this past week's tip has to do with checking your withholding. Too much withholding means you're giving the government an interest-free loan. The business tip of the month has to do with employees using e-mail and the risks involved. Sometimes we don't think about those things. The financial tip of the month has to do with getting serious about credit card debt. My website address is: http://www.llhcpa.com .

Here't the latest tax tip:

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Save receipts for the new sales tax deduction

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One of the tax laws passed last October brought back the itemized deduction for state and local sales taxes - but only for 2004 and 2005.

For these two years, you can choose to deduct on your federal income tax return either state and local income taxes or state and local sales taxes. The law came too late in 2004 for taxpayers to save sales tax receipts, but you can use tables provided by the IRS to figure your deductible amount. It's based on income, family size, and state of residence. You can increase the table amount by general sales taxes paid on certain big-ticket items, such as motor vehicles, planes, boats, homes, or home-building materials.

This new deduction mainly provides tax relief for those who live in states with sales taxes but no state income tax. However, many taxpayers in other states might also benefit. The prudent thing to do is to save sales tax receipts for 2005, particularly if you're planning to make some large purchases. Then at filing time next year, you can take the deduction (either income taxes or sales taxes) that gives you the lowest federal income tax bill.

Note: The deduction isn't available to taxpayers who take the standard deduction; nor is it allowed in calculating the alternative minimum tax.

If you need more information, contact my office.

Linda