Sales Tax

[Unregistered]

I have a client who is the General Contractor for building himself a new home. Part of the
material was purchased in 2005 and the remainder will be purchased in 2006.
Question--Can sales tax, on material purchased in 2005, be deducted on 2005
return, even though the building of the house has not been completed. Is it correct
that the sales tax deduction is only available for 2004 and 2005.

[Bees Knees]

Unless Congress extends the sales tax deduction, it only applies for tax years 2004 and 2005.


As for the year of deduction, I don't see anything in the instructions or code that says you wait until the construction is complete. I would assume normal cash accounting rules would apply meaning you deduct the taxes when paid.

[Unregistered]

Thanks Bees Knees

Thanks for your reply. I just heard yesterday that congrees has extended
the Sales tax Deduction for one year. I suppose it is waiting the President's
signature.

[jainen]

All that happened

All that happened this week was the House of Representatives passed its tax reconciliation bill which includes this extension. The Senate has also been at work, but that's a long way from Congress approving and the President signing. The two versions don't match, you know, and Congress won't be in session very many more days this month so chances of it getting through a conference committee and accepted by both houses before the end of the year are about the same as my chance of winning the lottery and not caring any more.