Calculating Your Sales Tax Itemized Deduction   Perhaps one of the most refreshing changes to the tax law this year affecting Tennesseans is the allowance to deduct state and local general sales tax.  Residents of states that have both a state income tax and a state sales tax may deduct whichever is most beneficial to them.  This new deduction is for 2004 and 2005 only unless extended by Congress.    To determine your deduction, you may use one of the following two methods.  State and Local Sales Tax Table amount or Calculate the actual sales tax you paid on all of your nondeductible personal (non-business) expenses.  The following "big ticket" items are expressly allowed in addition to the Optional Table amounts: Purchases or leases of motor vehicles, including cars, boats, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Home improvement materials purchased during the year.  We realize many of you will benefit from basing your deduction on your actual sales tax expenses, especially if your income is over $200,000.  Should you choose to use this method, you may look for the tax you have paid throughout 2004 in sources such as your checkbook, credit card statements and year-end summaries, and your personal finance software such as Quicken.  One area to be sure to include is home improvement materials ranging from cabinetry to appliances; however, the sales tax must be stated separately on your invoices for these costs to be included.  We have prepared a Sales Tax Deduction Worksheet which is helpful in estimating your actual sales tax paid if you are like most people and didn't keep all of your receipts throughout the year.    We adjusted the optional state sales tax table provided by the IRS to include the local sales tax rate of 2.25% paid by Nashvillians in addition to the state's general sales tax rate of 7%.  The resulting combined state and local sales tax table is at the end of this email.    If you live in areas outside of Nashville, click here to find the state sales tax table applicable to you.  IRS Publication 600  contains general information that may also be helpful.