What is a SALT Deduction and Why Is It Such a Big Deal?
SALT, stands for State and Local Taxes. This has become a very big deal! This deduction is now limited, and the standard deduction has been increased!
Jack and Susie own a home in a location where they pay state income tax ($6,000), local income tax ($3,000) as well as property tax ($6,500) on their home. In previous years, they would have been able to deduct the total of $15,500 on their federal income taxes. This was already over the standard deduction of $12,700, which means any other itemized deductions would continue to reduce their tax liability.
Beginning in 2018, the SALT deduction has been limited to $10,000. Although their “other” tax obligations may continue to increase, they are only allowed to take the $10,000 toward their federal income tax obligation. As a married couple filing joint, their new standard deduction is $24,000. They would have to have at least an additional $14,000 in itemized deductions to reach the stand deduction threshold. This is going to be even more difficult, since other deductions, such as casualty and theft losses, un-reimbursed employee expenses, tax preparation expenses, moving expenses and other miscellaneous deductions have been excluded.
Check out this link to see how your state measures up to the rest of the nation. https://www.kiplinger.com/tool/taxes/T055-S001-kiplinger-tax-map/index.php
Citizens in high-tax states will be impacted the most by this new law. Make sure you understand the implications of the new tax laws and if you need help, contact Excerebus CPA Firm at email@example.com or 407-988-5647.
Categories: Tax Information