Nearly 1 million state taxpayers can expect to pay hundreds of dollars less in federal taxes for 2004 and 2005, thanks to the recently approved American Jobs Creation Act.

As part of the massive corporate-tax bill, signed by President Bush in October, residents will be allowed to deduct state and local general-sales tax from their federal income tax for the first time in nearly 20 years.

Here are some basics Washington taxpayers should know about the new sales-tax deduction:

Q: How do I know if I benefit?

A: Generally, said Steven Sprenger, a Seattle H&R Block owner, taxpayers who itemize deductions will benefit. That usually includes homeowners with a mortgage, and people with large charitable contributions, medical expenses or out-of-pocket, job-related expenses.

According to state Department of Revenue spokesman Mike Gowrylow, 37 percent of all state taxpayers will itemize this year.

Q: So who's most likely not to be affected or notice a difference?

A: Mostly, lower-income taxpayers and renters, Sprenger said, because renters don't pay mortgage interest and property taxes like homeowners do.

Q: How much money are people expected to save?

A: It depends on how much they earned in 2004, but analysts believe typical taxpayers who'll benefit will see $300 to $500 in savings.

Q: Can you file any form to take advantage of this?

A: Taxpayers must file Form 1040, with Schedule A, Itemized Deductions, attached. Make sure, however, that filing an itemized return will actually save more than filing a standard deduction.

File an itemized return if your actual amount of taxes comes out larger than the standard deduction. Check this by consulting a sales-tax table, Publication 600, prepared by the Internal Revenue Service.

The tables provide average sales tax based on factors such as family size, income level and state. Publication 600 is available on the IRS Web site, www.irs.gov, or by calling 800-829-3676. The IRS plans to send the publication to all taxpayers who get a Form 1040 tax package.

Taxpayers may also add in sales taxes paid on motor vehicles (up to the amount of tax paid at the general sales-tax rate), aircraft, boats, homes and home-building materials (if the tax rate is the same as the general sales-tax rate).

Q: What should I do if I didn't save my receipts in 2004? Do I need to save all my receipts this year?

A: Don't worry, most people didn't save all their receipts.

"My guess is that the bother of keeping all those receipts is more than most people want to be troubled with, which is why they'll take the table amount instead," Sprenger said. "For some folks who don't spend a lot, the table amount will be bigger than their actual receipts they added, so there's no point in them worrying about it."

However, if you spend a lot, especially on big-ticket items, it could be worth keeping all your receipts that show sales tax.

Q: What can I do to be more prepared in 2005?

A: If taxpayers find themselves itemizing for the first time this year, says Bob Scharin, editor of Warren, Gorham & Lamont/RIA's Practical Tax Strategies, a monthly publication for tax professionals, that should be a signal to start keeping better records.

That could be as simple as buying an expandable file folder and sorting expenses by different categories, or highlighting big purchases in your check register. If you are itemizing, it may also be a wise time to hire a professional to handle your taxes.

Q: What does all this money mean for the state?

A: Chang Mook Sohn, executive director of the Washington State Office of the Forecast Council, believes sales-tax deductions could be more than $430 million for state taxpayers — money that'll be spent here.

"We're keeping a half-billion in the state, so it's got to be good [for the state economy]," said the Department of Revenue's Gowrylow, who believes Washington may see an increase in the number of motor vehicles and other big-ticket items purchased this year.

Q: Why is this sales-tax deduction good only for tax years 2004 and 2005?

A: Ever since the sales-tax deduction was eliminated nationwide by President Reagan in 1986 as part of a tax overhaul, taxpayers in Washington and six other states have grumbled that the other 43 states at least have an income tax that can be deducted.

When this year's bill included a provision for the sales-tax deduction — even if for only two years — many lawmakers jumped at the chance for equity.

Rep. Brian Baird, D-Vancouver, who's long championed the parity, said one of his priorities next year is to introduce legislation to make the deduction permanent. Others in the state's congressional delegation also want it to stay.

"What everyone will oppose," Baird said, "will be any change that will take away sales-tax deductions but leave income-tax deductions."

J.J. Jensen: 206-464-2761 or jjensen@seattletimes.com