Inaction by the dysfunctional Congress and White House in 2013 is stripping Texans of one of the state's most popular and widely used federal income tax breaks, 1200 WOAI news reports.
Since 2004, Texans who use the long form and itemize deductions have been able to deduct sales taxes from their federal income tax bill. The measure was the brainchild of former Sen. Key Bailey Hutchison (R-Tx) who reasoned that since residents of the 43 states which have state income taxes can deduct those taxes on their 1040s, the seven states which rely instead on sales taxes should be able to do the same.
"The big tax credit that we have all reaped the rewards of in Texas of being able to write off our sales taxes, that is not going to be available to us after December 31st," Wendy Kowalik, President of the San Antonio financial consulting firm Predico Partners told 1200 WOAI news.
About 11 million filers in the seven states claimed $17 billion in local sales tax deductions in 2011, according to the Pew Charitable Trusts.
This is a big deal for Texas taxpayers. The average Texan deducted $388 in sales taxes in 2011. The tax deduction has also been a major driver for the state's economy, encouraging consumption during the Great Recession and helping keep the Texas economy strong.
You'll be able to deduct sales taxes on your 2013 federal income taxes which must be paid by April of 2014, but not in the tax year that begins on Wednesday.
"Any big ticket items that people are going to want to purchase, they might want to do that before December 31st," Kowalik said.
The sales tax deduction for the seven states without state income taxes has been routinely renewed as part of tax extension deals. Kowalik says the deduction could be retained, potentially as part of an agreement to continue long term unemployment compensation benefits, but right now she says it doesn't look likely.
"Unless they step in and make changes right now, it is not set to renew," she said. "There is nothing in the works that we can see."
Other popular federal income tax breaks which vanish when the big ball falls Tuesday night include the deduction for college tuition and fees of up to $4,000 for parents and college students. The Educator Expense Deduction which helps teachers pay the costs of school supplies will also go away in 2014, as will your ability to deduct premiums for mortgage insurance as part of your residential interest deduction.