SALT Deduction – has rusted out your 2021 Itemized Deductions

A picture of a rusted out boat

If you itemize your deductions, the aggregate amount of SALT State and Local Taxes shall not Exceed $10,000.

SALT TAXES ARE: State and Local Taxes are Real Estate Taxes, State and Local Income Taxes, State and Local Personal Property taxes.

Based on our experience from the 2021 tax season (2020 Form 1040), the $10,000 SALT limitation forced many taxpayers to use the Standard Deduction.

For your 2021 Form 1040 The Standard Deductions per the IRC are:

Married Individuals Filing Joint Returns $ 25,100
Heads of Households $ 18,800
Unmarried Individuals $ 12,550
Married Individuals Filing Separate Returns $ 14,250
Standard Deductions

E Ten Broeck SALT predictions:

Due to the fact that taxpayers who used to itemize are now forced into the Standard Deduction, I have the following predictions:

  • Charitable deduction: There will be a decline in charitable giving. Tax savings motivate charitable giving.
  • Mortgage Interest Deduction: There will be a decline in Home Ownership, more taxpayers will consider renting verses owning a home. Same applies to Real Estate Taxes. Tax favored deductions like mortgage interest and real estate taxes encourages home ownership.
  • SALT Taxes: Taxpayers will consider moving to states that offer lower lower real estate and income taxes. In other words, did you see the exit New Jersey for good sign, last time you drove the New Jersey Turnpike?
  • Employee Business Expense Deduction: Employees with high out-of-pocket expenses will form LLC’s. Self employed people will move these business expenses to Schedule C.
  • Investment Interest Deduction: Investors will seek lower fees, and/or use discount brokers.

Thanks for reading this post. Lastly, send me your thoughts and comments at:

Author: Eric Ten Broeck

Eric has his MBA in taxation and a post master's certificate in finance. He has created businesses in the accounting services space. Eric has helped many businesses get established and prosper.