The Congressional Joint Committee on Taxation staff's investigative report of Enron Corporation and other information revealed that taxpayers were engaging in various tax motivated transactions to duplicate a single economic loss and, subsequently, were
deducting such a loss more than once.
In such cases, if a taxpayer itemizes for state tax purposes and can claim the sales tax deduction, he or she may be better off
deducting sales tax on the Federal return, even though the deduction results in no Federal tax savings.
For 2004 and 2005, instead of
deducting state and local income taxes, taxpayers would be able to choose to deduct state and local sales taxes by either (1) accumulating receipts or (2) using IRS sales tax tables and adding actual sales taxes paid for major items, such as vehicles.
However, section 163 (h)(1) bars individuals from
deducting "personal interest." Section 163(h)(2)(A) defines this term as any interest allowable as a deduction, other than that paid or accrued on debt "properly allocable to a trade or business" (other than the trade or business of being an employee).
But if you get to deduct three-quarters of your lease payment, you're actually
deducting three-quarters of the interest as well.
Thus, where an expenditure relates to the production of current income notwithstanding some incidental ensuing future benefit), the proper period for
deducting an expenditure is the current period.
Deducting sales and use taxes: For tax years 2004 and 2005, taxpayers can deduct state and local sales and use taxes in lieu of state income taxes, based on either actual taxes or IRS published tables that will be based on income, number of dependents and other factors.
Instead of
deducting actual expenditures, taxpayers can use the per diem amounts for food and lodging in revenue procedure 93-50.
You can get more information on
deducting your home office expenses by reading IRS publication No.
Under section 461(d), however, taxpayers were required to continue
deducting the CFT as though the 1972 (and other post1960) law changes did not occur.
465 at-risk rules; however, taxpayers who invest in passthrough entities may be affected the most, because they are likely to use borrowed funds to increase their at-risk basis for purposes of
deducting allocated losses.
Employees and the self-employed can use these rates instead of
deducting the actual costs--such as depreciation, maintenance and repairs, tires, gasoline, oil, license and registration fees and insurance--of driving their cars.
