As a reminder, here again are the two questions I asked originally.
I'd be grateful for answer from you or anyone to these questions.
On Mon, 19 Feb 2024 14:52:04 EST, Stan Brown wrote:
(1) The instructions, page A-4, say
"Your 2023 income [for purposes of the optional sales tax tables] is
the amount shown on your Form 1040 or 1040-SR, line 11, plus any
nontaxable items, such as ... Nontaxable part of IRA, pension,
or annuity distributions. Don't include rollovers."
The sales tax calculator <irs.gov/SalesTax> has similar language.
Qualified Charitable Distributions are nontaxable IRA distributions.
Should I include them as income for the calculator or the tables?
That's an interesting question. I haven't responded to that
because I don't know the answer. I was hoping someone else
would respond who knows the answer.
(2) Separate question but related: Based on a trial run with the
calculator, I see that the calculator does not apply the sales tax
rate (8% last year, in my case) to total income but only to a
fraction of income. Does anyone know whether it is a fixed percentage
or variable with income, and how it is determined?
The question here is not about the tax rate, but about what portion
of income the tax rate gets applied to.
The calculator does not apply the sales tax rate to any
specific fraction of income. It just doesn't work that way.
You are resisting using the table in the instructions, but
the calculator uses the table, not a formula. Built into the
table is an assumption about how much of your income is used
to make purchases that are subject to sales tax. I don't
know precisely how they determine that, but that assumption
is not based on a formula. It's based on what items are
subject to sales tax in each state, and studies of what
people buy. It will be different in each state. What people
buy will vary with income, but it's probably based on
surveys and studies, not a formula.
For local tax, if you work through the worksheet for local
tax on page A-5 of the instructions you will see that (at
least for California) it calculates the ratio of the local
tax rate to the state tax rate. Then it applies that ratio
to THE SALES TAX FROM THE TABLE, not to an amount of income.
That's also what the calculator does. There is no getting
away from using the table.
Furthermore, you cannot escape the fact that the table does
not rely on the exact amount of income. It works in large
steps. For example, experiment with the calculator using the
following inputs.
Tax year 2023
Single, no dependents, no large purchases
AGI - see below, no nontaxable income
ZIP code 93501, Tehachapi
With those parameters, for any AGI from $50,000 to $59,999
the sales tax will be $1,018.92, so the calculator is
obviously not applying a tax rate to any specific fraction
of income. For AGI of $60,000 the sales tax will be
$1,087.36. That's $68.44 sales tax on an additional $1 of
income. That's not just rounding to whole dollars.
It seems to me that finding a formula is not your real goal.
Your real goal is to make your spreadsheet calculate the
sales tax deduction. Couldn't you incorporate the table for
California into your spreadsheet, and have the spreadsheet
look up the sales tax deduction in the table (with
appropriate adjustment for local tax)?
I also can't help wondering why the sales tax deduction is
of any significance to you in notoriously high-tax
California. I'm sure that for most people in California,
their state income tax is much more than the sales tax, so
they never deduct sales tax. Is your situation such that
your state income tax is very low?
Bob Sandler
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