Year-End Tax Thoughts for New Yorkers
At the end of last year, Congress passed the Tax Cuts and Jobs Act, which took effect in 2018. Although it’s expected to “sunset” as of January 1, 2026 (in 8 years), you may need planning now.
$10,000 Cap on State, Local and Property Taxes
For NewYorkers, the new $10,000 cap on deductions available on your federal tax return for state and local taxes, could be costly. Let’s say your wages are subject to $9,000 of state and city taxes, and your property taxes are $14,000. In the past you got a state tax deduction of $23,000 on your federal return. Under the new tax rules, that $23,000 deduction will be shaved to $10,000.
What does the $13,000 lost deduction cost you?
A single person (with taxable income between $82,500 and $157,500), who is in the 24% tax bracket,not subject to Alternative Minimum Tax, will pay an additional $3,120 in federal taxes. The new standard deduction increase may partially offset the tax increase, but there are no longer any personal exemptions, which was approximately $4,000 per person.
Some things to keep in mind:
- Consider the real cost of renting versus owning if you would be affected by the property tax cap. This may be especially important for people in transition, unsure if they really want to buy or stay in a home.
- If you’re planning a move or searching for a job, you may want to consider all taxes and how they’ll impact your federal return too. States with no income tax may have an advantage over New York.
If you run your own numbers, you can see the impact this tax cap will have on your federal tax picture. The federal government reduced the number of people who itemize, which adversely affects taxpayers in high tax states, like New York.
Cap Doesn’t Apply to Investment or Business Property
Real estate that is used for investment or commercial purposes is not subject to this $10,000cap. However, the cap applies to taxes paid on both a primary residence and a secondary residence. This means that if the taxes on your home and vacation home exceed $10,000, you’ll lose part of your deduction.Tags: Estate Lawyer, Estate Tax, Personal Income Taxes, Probate Lawyer, Susan Parker