Special Tax Break for Many Retirees in Alabama

Thanks to last-minute tax extender legislation passed in December, taxpayers filing their 2015 returns can still deduct either state income tax paid or state sales tax paid, whichever is greater.

Here’s how it works according to the tax advisors at Cook & Company …

We compare your state income tax deduction against estimated sales tax you paid based on federal tables and take the larger.

Also, If you bought a big-ticket item like a car or boat in 2015, it might be more advantageous to deduct the sales tax, because we get to add that to the table amount. We always look at any state income taxes withheld from your paycheck for comparison just in case. If you’re self-employed, we can include the state income taxes paid from your estimated payments. In addition, if you owed taxes when filing your 2014 tax return in 2015, we can include this amount when you itemize your state taxes this year on your 2015 return.

This tax break is especially important to those who are drawing federal, state, military or defined benefit pensions, all of which are not subject to state income tax in Alabama.

Mr. Cook says, “A lot of couples never bother to look at how they would fare by filing separate tax returns. More and more, we are seeing taxpayers realize significant tax savings by opting to file with the status of Married Filing Separately, it’s an election any married couple can make. Imagine one spouse who has paid state income tax and one who has not. They might get the benefit of both deductions!”