Taxpayers in the six-county metropolitan area who itemize deductions are eligible for additional deductions for sales tax, the Internal Revenue Service says.
Chicago taxpayers get the biggest break. Using the optional sales tax table, they can add 38 percent to the table amount.
For areas outside Chicago:
— Taxpayers living elsewhere in Cook County should add 19 percent to the table.
— Residents of Lake, Du Page, Kane, McHenry, Will, Madison and St. Clair Counties should add 5 percent.
— Residents of Springfield in Sangamon County should add 17 percent.
The increase in the six-county area compensates for the taxes residents of the area pay to support the Regional Transportation Authority and the tax from utility bills.
Last year, taxpayers had to increase their sales tax deduction an extra 10 percent because of additional utility taxes charged, but this year that is unnecessary because the sales tax tables have been adjusted.
Once the additional deduction has been computed, taxpayers add that to the amount on the sales tax table. That sum goes on Line 8a of Schedule A for the 1040 form.
The IRS gives this example:
A Chicago taxpayer with a family of four and an income of $21,000 would increase the sales tax amount of $327 by 38 percent to come up with $451. If that taxpayer lived in suburban Cook County, he would pay $389, or 19 percent ($62) added to the $327. If that taxpayer lived in Du Page, McHenry, Lake, Will, or Kane County, he would enter an extra $16, or 5 percent of $327.
Also, don`t forget that you can add to the table amount any sales tax paid on a car, motorcycle, motor home, truck, boat, plane or materials to build a home.
Many taxpayers do not use the optional sales tax table, but instead calculate the actual sales tax they paid in 1985. This alternative takes more time, but often the deduction is larger, in some cases, twice as large as the table amount.
If you decide to go this route, however, you must have kept your telephone, gas and electricity bills so you can add the taxes on them.
The first step is to obtain the utility tax figures directly from the portions of your bills you keep. Those taxes are calculated in such a way that it is practially impossible to work out what the tax was if you have records only of the total bill paid.
For a typical Chicago resident, the taxes you should include are the state taxes listed on your bills from Peoples Gas, Commonwealth Edison and Illinois Bell.
If you used American Telephone & Telegraph`s long-distance service and the calls were originated in Illinois, you will find the state tax listed on a page titled ”AT&T communications current charges.”
On other utility bills, look for the state tax.
The IRS says you can also deduct city, local or municipal taxes on utilities, but only if those taxes were levied at the same rate as the general sales tax on products sold in the community. If not, no part of any of these local taxes on utilities can be deducted, the IRS said.
A spokeswoman at the Illinois Department of Revenue said it was rare for an Illinois community to tax utility bills at the same rate as the general sales tax. Chicago, for instance, does not.
Once you have added up your utility taxes, you have to calculate your other sales taxes. There are two ways to do that: Add the taxes on receipts you have kept or go through your checkbook and credit card statements and figure out the sales tax you must have paid.
If you choose the second method, you must make two totals: money spent on food and medicine, and money spent on other items subject to sales tax.
In general, taxable items are goods and not services. Restaurant meals and hot takeout foods go with other sales-taxable items. Medicines include over-the-counter products as long as they claim to have medicinal value.
The IRS generally accepts that half of out-of-pocket cash is spent on taxable items, although you may be able to prove your percentage is higher by keeping records of your spending.
The next step is to calculate your taxes from your totals. If you live in Chicago, divide the food and medicines total by 1.02 and subtract that answer from your original total. The result is the amount you spent on food and medicine sales tax.
For example, if you spent $4,000 on food and medicines, divide that by 1.02 to get $3,922. Subtracting that from $4,000 shows the tax is $78.
Do the same for your ”other sales taxable” total, but divide by 1.08. The 1.02 on food and medicines reflect the 2 percent tax on those items, and the 1.08 reflects the 8 percent tax.
For the rest of Illinois, use the following numbers:
— Residents of Cook County outside Chicago should divide the food and medicine total by 1.02, reflecting the 2 percent tax, and divide the other total by 1.07, reflecting the 7 percent tax.
— Residents of Lake, McHenry, Kane, Du Page and Will Counties and parts of Madison and St. Clair Counties should divide the food and medicine total by 1.0125, reflecting the 1.25 percent tax, and divide the other tax by 1.0625, reflecting the 6.25 percent tax.
— Residents of Springfield should divide the food and medicine total by 1.01, reflecting the 1 percent tax, and divide the other total by 1.07, reflecting the 7 percent tax.
— Residents of Illinois who pay a 6 percent tax should divide the food and medicine total by 1.01, reflecting the 1 percent tax, and divide the other total by 1.06, reflecting the 6 percent tax.
The IRS also says that certain types of nontaxable income should also be considered in computing any allowable sales tax deduction. Such income could be the nontaxable part of unemployment compensation or Social Security benefits, public assistance payments, veterans benefits and worker`s compensation.
In addition, the dividend exclusion of $100 and deduction for married couples who both work should also be added to regular income.
