This Tax Season, Cantwell Encourages Washingtonians to Take Advantage of State Sales Tax Deductions

WASHINGTON, D.C. – As the April 18 federal tax return deadline approaches, U.S. Senator Maria Cantwell (D-WA) wants to remind Washington state residents to take advantage of state sales tax deductions if they itemize their federal tax returns. This itemized deduction allows taxpayers in states without an income tax to deduct the sales tax they pay in 2010 on this year’s federal income tax returns.

“Washingtonians finalizing their 2010 tax returns should remember to deduct state sales tax if they itemize,” said Senator Cantwell. “Especially during these tough economic times, it’s crucial that Washingtonians are treated the same as residents in other states. I worked hard to ensure that this provision was extended this year, and I will continue to fight to ensure this deduction is permanent.”

This deduction is real money for real families: an average of $500 more in the pockets of Washington state taxpayers. In 2008, the most recent year of published IRS data, more than 859,000 Washingtonians took advantage of the deduction, reducing their taxable income by approximately $2 billion. That translated into nearly $500 million staying in the Washington state economy instead of going to the U.S. Treasury in tax payments. The state sales tax deduction increases economic growth by drawing in new businesses, creating new jobs, and keeping more money in the state. Taxpayers in six other states with no state income tax also benefit from this deduction: Alaska, Florida, Nevada, South Dakota, Texas, and Wyoming.

For nearly two decades, Washington taxpayers were penalized because the federal tax code did not allow deduction of state and local sales taxes. That disparity ended in 2004 when Senator Cantwell successfully restored the deduction. For the first time since 1986, taxpayers in Washington and other states that have no state income tax were able to deduct sales taxes from their federal income tax. But the extension was never made permanent, requiring repeated approval by Congress. Cantwell, a member of the Senate Finance Committee, has led the effort each year to ensure that the deduction is extended. She helped secure the most recent extension in December 2010, ensuring taxpayers in states without an income tax could deduct the state and local sales taxes they paid in 2010 on this year’s federal income tax returns.