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|
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.
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