Sales tax write-off part of major tax deal

WASHINGTON -- The major tax deal reached Monday envisions a two-year extension of specialized deductions including the ability to write off a portion of state and local sales taxes, according to Obama administration officials.

A piece of the tax code that allowed Nevadans and taxpayers in a handful of other states to take advantage of the sales tax deduction expired at the end of 2009. The agreement allows for making the deduction retroactive for purchases made this year, and would extend it until Dec. 31, 2011.

Obama administration officials emphasized the deal between President Barack Obama and congressional Republicans was a framework that would need to be filled in with the specific tax extensions.

"There is a set of extenders which are traditional and have always been extended, and we will definitely be extending those," an administration official said in a telephone briefing.

"Certainly the House, the Senate the administration need to work out some of the other long list of relatively small extenders, but I don't think there are any major philosophical differences," said the official, who could not be identified by name under White House ground rules.

The sales tax write-off is among a series of targeted tax breaks for businesses and families that either have expired or are expiring at the end of the year. They cut taxes for college tuition and certain property taxes, for school professionals who buy classroom supplies and computer software and for business that invest in research.

The sales tax deduction was enacted in 2004, but only as a temporary tax break that has been extended several times since then. It allows taxpayers to choose whether to claim a deduction for their state income taxes or for the taxes they paid on purchases in the previous year. Seven states including Nevada collect no income tax, while two others collect income taxes only on dividend and interest income.

According to the Internal Revenue Service, 345,244 Nevadans claimed more than $546 million in 2008 deductions for state and local sales taxes.

The states that impose no income taxes are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. New Hampshire and Tennessee limit income taxes to dividends and interest.

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760.