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Author: twputnam One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121565  
Subject: Another sales tax question Date: 3/30/2006 12:31 PM
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We have had major water damage, water pipe failed, to our home. It is costing about $50,000 to repair/renovate. About $1500 of that is sales tax on materials and appliances. We have $5000 deductible, the remainder is covered by insurance. Can we deduct the sales tax or any portion of it because it is less than our deductible?

Thanks,
Terry
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Author: JeanDavid Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 85547 of 121565
Subject: Re: Another sales tax question Date: 3/30/2006 1:47 PM
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We have had major water damage, water pipe failed, to our home. It is costing about $50,000 to repair/renovate. About $1500 of that is sales tax on materials and appliances. We have $5000 deductible, the remainder is covered by insurance. Can we deduct the sales tax or any portion of it because it is less than our deductible?

I am not a tax lawyer, but the amount under the deductable on your insurance may be an uninsured casualty loss on your itemized deductions. You may wish to check if it is allowed.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 85553 of 121565
Subject: Re: Another sales tax question Date: 3/30/2006 3:03 PM
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We have had major water damage, water pipe failed, to our home. It is costing about $50,000 to repair/renovate. About $1500 of that is sales tax on materials and appliances. We have $5000 deductible, the remainder is covered by insurance. Can we deduct the sales tax or any portion of it because it is less than our deductible?

The $5000 unreimbursed expense is potentially deductible as a casualty loss. However, the casualty loss rules limit your deduction to losses greater than (approximately) 10% of your AGI, so it's not likely you'll see any benefit. If the damage was related to one of the hurricanes, you may be able to waive the AGI limitation.

In any case, the sales tax would probably qualify for addition to the table amount for your state. Compare this to your state income tax payments to determine the better deduction.

Ira



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Author: twputnam One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 85561 of 121565
Subject: Re: Another sales tax question Date: 3/30/2006 8:43 PM
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Ira,

Thanks for your assessment! We do not qualify for a casuality loss because of gross income. We may be able to use the sales tax deduction, with the added materials/appliances taxes. Will have to see what the state income taxes are going to be.

Terry

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