SALT Deduction

DrTravel

Active member
Well I just received my property tax bill today :-[

Remember the good old days when we could deduct all of our SALT but now it's limited to $10K. Here's the question I'm pondering...we used to deduct the state income taxes (plus all the other taxes) paid in one year but in the following year we had to declare our state income tax refund as income. So now my property tax bill will exceed $10K by itself...pretty much like everyone who owns a home on this forum. It makes no sense to include my state income taxes in my deduction calculation because I don't need it to exceed $10K. I wonder, do I need to include it? Will TurboTax automatically include it - or give me an option to choose which taxes I want to include in my $10K? The reason I ask is because If I don't declare this deduction, then I don't have to declare the state income tax refund as income. Seems like a double whammy to be forced to declare the useless deduction but then be required to declare the refund as income.

Inquiring minds want to know. I'm sure there are numerous experts on this forum who know the answers!
 
Did you pay AMT in 2017? Is your financial situation pretty similar in 2018? If your income supports a ~$1M mortgage, you have to be in the AMT; and if you are, you haven't been fully deducting property taxes and CA income taxes anyway.

Deductions are always voluntary.
 
@ DRtravel - I hope you really are a doctor and don?t work in finance :)

Prior to the tax law change that capped the SALT deduction, if on your federal return you deducted 30,000 in state income taxes paid, then filed your California tax return and got a refund of 5,000 from california, which means you ended up paying 25,000 in taxes for that particular tax year.  In the subsequent tax year when you received the 5,000 back from CA, the IRS is just recapturing the taxes you should have paid in the prior year because your deduction should have been 25,000 vs 30,000. So you essentially got an interest free loan from the IRS.

Now under the new tax law, since they cap your SALT taxes at 10k, the same situation would apply as in prior years to the extent you paid less than 10k in state taxes but deducted 10k (or deducted 8k but ended up paying 6k, etc). Even if you enter in TurboTax that you paid say, 20k in SaLt taxes for 2018, it will cap it at 10k. So as long as you paid more than 10k in SaLT taxes related to 2018 the IRS won?t tax your 2018 California refund received in 2019. In the past, Your refund was only deemed ?income? because you over-deducted in the prior year.  Now as long as you pay 10k in salt taxes you are not overdeducting.

Hopefully that makes sense.
 
No AMT, don't work in finance and not a medical doctor.

I think I just will not list state income taxes on Schedule A as they will not be needed to reach $10K. Just hoping that TurboTax will allow me to - you know the program automatically fills in stuff from other forms so once I enter the W-2 stuff it will populate the state income tax on Schedule A.
 
OK, did my taxes over the weekend and spent the day with my CPA.  As I suspected and as he told me last year...TAX CUT.  I will not share specifics but his explanation was that the brackets were not only lowered but widened,  AMT reduction, and higher child credits helped immensely.  My mortgage interest write off remained the same as my mortgage is grandfathered in and under $750k anyway.  He has done over 25 returns already and the results were much the same.  Even with the elimination of SALT my tax refund increased nicely.  Thank you Mr. President!!
 
morekaos said:
OK, did my taxes over the weekend and spent the day with my CPA.  As I suspected and as he told me last year...TAX CUT.  I will not share specifics but his explanation was that the brackets were not only lowered but widened,  AMT reduction, and higher child credits helped immensely.  My mortgage interest write off remained the same as my mortgage is grandfathered in and under $750k anyway.  He has done over 25 returns already and the results were much the same.  Even with the elimination of SALT my tax refund increased nicely.  Thank you Mr. President!!

You forgot to mention about the reduction of the state tax and property tax.

Why do you always have to not tell all the facts
An opportunist and manipulator.
 
If there is no flaw in the new tax law. Why did Trump and the Republican Congress last year talk about passing a middle class tax cut? (They controlled not houses. They never did of course)

Maybe it was a Midterm fake promise.
 
That is including the State and property tax reduction.  The whole ball of wax, and I got a bigger refund and my effective rate was lower. The numbers don't lie...TAX CUT!!
 
morekaos said:
That is including the State and property tax reduction.  The whole ball of wax, and I got a bigger refund and my effective rate was lower. The numbers don't lie...TAX CUT!!

Maybe for you. But the middle class got screwed. They really did. It?s a shame. This is why the GOP is out of touch.
 
As I said, this seemed typical for my CPA.s clients so far.  If this holds in a state that lost the SALT deductions than it will be even better in all the other states.  We were the ones that were supposed to get hit and my demo specifically was assumed to get destroyed...not the case.  Tax cuts for all!!!
 
morekaos said:
OK, did my taxes over the weekend and spent the day with my CPA.  As I suspected and as he told me last year...TAX CUT.  I will not share specifics but his explanation was that the brackets were not only lowered but widened,  AMT reduction, and higher child credits helped immensely.  My mortgage interest write off remained the same as my mortgage is grandfathered in and under $750k anyway.  He has done over 25 returns already and the results were much the same.  Even with the elimination of SALT my tax refund increased nicely.  Thank you Mr. President!!

Sounds about right.  Most people don't understand how taxes work and just take a few talking points out of context. I'm confident my taxes will go down as well. 

It would be interesting to see in which hypothetical scenarios someones tax liability will go up with the new tax law.    I'm guessing they will be very atypical scenarios.  Anyone care to take a stab at it?
 
morekaos said:
As I said, this seemed typical for my CPA.s clients so far.  If this holds in a state that lost the SALT deductions than it will be even better in all the other states.  We were the ones that were supposed to get hit and my demo specifically was assumed to get destroyed...not the case.  Tax cuts for all!!!

Of course you metioned you were in the top bracket before.
 
woodburyowner said:
morekaos said:
OK, did my taxes over the weekend and spent the day with my CPA.  As I suspected and as he told me last year...TAX CUT.  I will not share specifics but his explanation was that the brackets were not only lowered but widened,  AMT reduction, and higher child credits helped immensely.  My mortgage interest write off remained the same as my mortgage is grandfathered in and under $750k anyway.  He has done over 25 returns already and the results were much the same.  Even with the elimination of SALT my tax refund increased nicely.  Thank you Mr. President!!

Sounds about right.  Most people don't understand how taxes work and just take a few talking points out of context. I'm confident my taxes will go down as well. 

It would be interesting to see in which hypothetical scenarios someones tax liability will go up with the new tax law.    I'm guessing they will be very atypical scenarios.  Anyone care to take a stab at it?

Think if you live in a high tax state (Cali, NY) are a super high income earner (>$1M/year) and you have a high value property (>$1M taxable) and you have a significant mortgage (>$750k)  you are gonna take a hit.
 
Even the Presidents enemies take advantage of the new tax laws...but will never admit it.  It's all about the Benjamin's.

The tax strategy behind Joe and Mika?s Florida ?studio?

After reports that married MSNBC anchors Joe Scarborough and Mika Brzezinski have been mysteriously broadcasting their show from Florida ? sources speculated that the location is to benefit Scarborough?s tax situation.

The ?Morning Joe? anchors have been reportedly on a home set in Jupiter, Fla., but using Washington, DC, backdrops.

Sources said the reason for the locale was a ?tax dodge? ? albeit a completely legal one ? since Scarborough has a home in Florida and would need to spend a certain amount of the time there for any tax benefit.

By moving to Florida, he?d reduce his tax burden by roughly $550,000. Scarborough reportedly makes $8 million a year and would pay 6.99-percent state income tax in Connecticut, while there?s no state income tax in Florida, the Post?s Josh Kosman reports. To qualify as a Florida resident, he?d need to be there 183 days a year.

https://pagesix.com/2019/01/26/the-tax-strategy-behind-joe-and-mikas-florida-studio/
 
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