SALT Tax Deductions

Written by Jim the Realtor

March 27, 2019

Politicians in mostly Democratic high-tax areas say the new federal cap on state and local tax deductions hurts their residents. Yet the vast majority of those taxpayers never actually got the break in the first place, undermining a key criticism of the Trump tax overhaul.

About three-quarters of people who in past years paid more than $10,000 in state and local taxes had been required to take the alternative minimum tax, meaning they couldn’t have written off the SALT levies anyway, according to IRS data analyzed by Bloomberg. And because the AMT has been scaled back as well, those top earners in fact get a new tax break by now being able to write off up to $10,000 of their SALT payments.

Bloomberg analyzed IRS data from 10 of the wealthiest counties in the U.S. — including New York’s Westchester, New Jersey’s Somerset, Connecticut’s Fairfield and California’s Marin counties.

The numbers could deflate some of the heated rhetoric over the 2017 tax overhaul, the Republican Party’s signature legislation of the Trump era. Since the law was enacted, governors and lawmakers from high-tax states have decried the change as a GOP assault on Democratic strongholds. New York Governor Andrew Cuomo called it an “economic civil war.”

“A lot of folks are coming in assuming they’re going to lose under the new tax law when in fact, they’re not,” said Ryan C. Sheppard, an accountant at Knight Rolleri Sheppard in Fairfield, Connecticut. “In many cases they’re doing better because in prior years the alternative minimum tax disallowed all their state and local tax deductions. Now they’re at least getting $10,000, where they got zero before.”

Link to Article

4 Comments

  1. WC Varones

    While most people are better off under tax reform (the AMT thing is huge in our area), it does change the buy vs. rent math significantly.

    I ran the numbers here.

  2. Eddie89

    We didn’t benefit at all from the “tax cuts”. Actually, our taxes went up in 2018 and we had to send a YUGE additional payment to Uncle Sam.

    Ironically, we actually got a refund from California! Which helped to offset the Federal hit by a little bit.

    Go figure!

  3. sdbuyer

    Rob from the poor give to the 1%. And yes if you are reading this I guarantee you, you are not in the 1%.

  4. sdbiyer

    That is a good spreadsheet above WC. So for an average home in North San diego, under the new Trump tax plan it costs roughly $700 month more Or $8400 year. That plus the increasing rates 6 months ago is why we ran out of steam with sales numbers. I am gonna guess it will get worse as more folks complete their teases.

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