The 2007 schedule A instructions allows home remodel materials sales tax to be added to the Sales Tax Table amount. These instructions were not in the schedule A or pub 600 instructions for 2005. Were they allowed on 2005 taxes?
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It's on page 5 of the 2005 instructions for schedule A & B. Look at instructions for line 7 of sales tax deduction worksheet.
"3. A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies" -
IRS words were present
I seem to recall that verbiage has always been included in the sales tax tables, including those of "days gone by" before such a deduction disappeared from Schedule A.
One caveat I do recall: The taxpayer must be able to prove HE/SHE actually paid the sales taxes for the materials. It's a no-go if you just paid a contractor for the work.
FEComment
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Contractor can pay the materials if it meets requirement c under number 3 on the same page (A-5) of the form instructions for 2005.
"Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly."Comment
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Sales taxes paid by contractor
Having no reason to doubt your statement, I will assume it is correct. BUT rest assured you or your contractor should have a receipt or something similar from the source of the building materials that shows the actual sales tax paid on the specified taxpayer's items only.
FEComment
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Well my statement is pretty simple to confirm since I refer to an IRS document and give the page number...
I was just clarifying that the taxpayer them self does not need to purchase the actual materials from the store, the contractor can purchase the materials as it says in the IRS form instructions. Just has to meet those requirements, and yeah of course taxpayer is going to need some evidence to substantiate the deduction. (Though I see no requirement for it to be actual receipt from the hardware store.)Comment
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Clarifications
O------ K------
No need to get defensive. I was just trying to express what I thought was a realistic suggestion for the client to prevent possible later confusion, regardless of whatever "the regulations" might say. I seriously doubt if a canceled check made out to taxpayer's agent [Show me that before-the-fact written contract!!] "Joe's Construction" would provide sufficient proof of any payment of sales tax table add-on amounts, especially if ole Joe bought a new refrigerator for you while he was shopping at Bubba's Homebuilding Supply Store.
For anyone who wishes to read those aforementioned IRS rules, here is the link: http://www.irs.gov/pub/irs-pdf/p600.pdf
Also, you might wish to read again the first line of my comment of 02/20/2008
FEComment
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