Over the last six weeks I’ve been repeatedly contacted by clients asking if a claim they’ve seen on the internet is true.

There are several versions of basically the same promotion, which I will refer to as “hype.” Hype is defined as an extravagant or intensive publicity or promotion (when used as a noun). Hype is defined as, to promote or publicize a product or idea, often exaggerating its importance or benefits (when used as a verb).

The most popular example of what I’m talking about goes like this …

URGENT for Anyone Who Bought ANYTHING in 2016:

Congress Passes $42.4 BILLION

“Consumer Rebate Program”!

119 Million Taxpaying Americans Can Now Get a Cash Rebate on Virtually EVERY SINGLE PURCHASE Made in 2016 …

But You Must Act Between January 1 and April 17 to Collect.

A client sent an email to me this morning at 5:51 am, so I decided it was past time for me to put this information out there in hopes of answering the question before I get more calls and emails.

The American Jobs Creation Act of 2004 gave taxpayers the option to claim state and local sales taxes instead of state and local income taxes when they itemize deductions. Under the law the option was available for the 2004 and 2005 returns only, but it was extended by the Tax Relief and Care Act of 2006.

Then it was extended again under the American Recovery & Reinvestment Act of 2009 (ARRA). This income tax deduction was extended again and again each year until finally in December 2016, at about midnight (as described in the pitch, although it wasn’t late at night to be secretive, it was late because the politicians couldn’t agree on everything) Congress made it a permanent deduction.

This sales tax deduction has been around for twelve years and it was made permanent in 2016. To benefit from it, you must be able to itemize your deductions. That means if you are a married couple under the ages of 65, your itemized deductions must be greater than $12,600. If you are a married couple over age 65, they must exceed $15,100 before you will get any benefit.

The statement in the hype, that you are entitled, even if you don’t keep receipts of your purchases, refers to the fact that the IRS provided tables and an online calculator where you can look up the standard amount of deduction you are entitled to based on geography and income level.

In the case of the client this morning, I reviewed his file and found that the amount he was entitled to last year was $0. The deduction would have been $1,388, but we had taken the $15,100 Standard Deduction, because all deductions including the sales tax only totaled $11,545. Because the taxable income of the client fell in the 15% bracket, if he could have benefitted from the deduction, he would have realized $208 of tax savings from the deduction ($1,388 x 15%).

Again, this tax deduction is IN LIEU of your State Income Tax Deduction, so if you paid $3,000 in Alabama Income Tax and your Sales Tax Deduction is only $1,388, you would claim the higher deduction for the state income taxes you paid, rather than the lower sales tax amount.

Our tax program automatically performs the calculation and analysis every year to see if our client could benefit from this deduction. My agents also ask if the client made any major purchases during the prior year. So rest assured that we are checking many, many items like this when we prepare your tax returns.

Here are three “rule of thumb” questions to know if you might benefit from this alternative deduction:

1. Do you itemize deductions? If the answer is no, you likely won’t benefit.
2. Do you pay state income taxes? If the answer is yes, you likely won’t benefit.
3. Did you make any very large purchases you paid sales tax on last year? If the answer is no, you likely won’t benefit.

The people that we routinely see each year that benefit from the Sales Tax Deduction are people who live in Tennessee, Florida, Washington, Texas and other states that do not have an income tax. Also, retirees that collect pensions that are not subject to Alabama income tax.