Taxpayers who itemize deductions are allowed to deduct the greater of the state income tax or state and local general sales tax paid during the year.

The sales tax deduction is the greater of:

(1) actual state and local sales tax paid based on receipts or

(2) an income-based amount from an IRS-created table, plus the sales tax on certain major non-business purchases (including vehicles).

Currently, the law allowing sales tax to be deducted is scheduled to expire after 2007. So if you are considering making a large purchase, such as a
car, within the next year, and your sales tax deduction would exceed your income tax deduction, you may want to accelerate the purchase into 2007 to be able to deduct the sales tax on the purchase. This strategy does not apply to the extent you are taxed by the alternative minimum tax (AMT).