Washington, D.C. - The bill authored by Congressman Kevin Brady (R-The Woodlands) that will allow Texans to continue to deduct state sales tax from their federal income tax returns for 2006 and 2007, passed the House of Representatives today in a larger measure and is slated for Senate passage. The state sales tax deduction saves Texans $1 billion dollars a year in tax relief. The President has promised to sign the measure into law.

 

“It’s an issue of fairness that Texas families be able to deduct every penny of state and local sales tax they pay throughout the year from their federal tax bill, especially when families in most states are deducting their state income taxes,” said Brady who  has perennially led the fight to extend the sales tax deduction.

 

Sales tax savings add up. According to the Internal Revenue Service a Texas family of four with an income between $30,000 and $40,000 is able to deduct $730 from their taxes—plus local sales taxes and sales tax paid on large purchases like boats, cars, or home appliances and home building materials.  

 

HELP FOR UNIVERSITIES

 

The tax extenders bill contained another provision authored by Congressman Brady to support higher education institutions in Texas. The bill extends permanently the current IRS exception for the State’s Permanent University Fund (PUF) from the tax-exempt bond arbitrage rules. Since the 1930’s, Texas public universities have issued tax-exempt bonds payable from the PUF to finance capital projects that have enabled the universities to provide superior educations to their students. The provision passed today preserves this valuable tool for Texas public universities giving them access to about $100 million in funding for capital projects each year. 

 

ADDITIONAL SAVINGS

 

The bill also contains several other key tax relief provisions supported by Brady that will benefit millions of working middle-class Americans.

 

• The bill extends the Research and Development tax credit that helps American companies stay competitive by putting more money in critical research to create new and innovative products.

 

• For teachers, the bill allows a deduction up to $250 of out-of-pocket costs incurred to purchase books, supplies and other classroom equipment.

 

• Military personnel serving in combat zones would have the option of including their combat pay in the earned income credit calculation possibly yielding them greater tax savings.

 

The bill would allow taxpayers, regardless of whether they itemize their deductions, to take up to $4,000 of higher education expenses in lieu of claiming the Hope or Lifetime Learning tax credits.