Tax reform will lead to tax law abuse. Duh!
Mileage tax deduction rates for 2018 bumped up a bit

Tax bill's $10,000 deduction cap to include state and local income and sales taxes, too

Mike Pence Kevin Brady leaving tax reform meeting Dec 12
Vice President Mike Pence (waving) and Ways & Means Chairman Rep. Kevin Brady (far right) leave a Dec. 12 meeting in which they discussed the final touches being made to the Republicans' tax bill, H.R. 1, the Tax Cuts and Jobs Act. (Photo courtesy Brady's Facebook page)

Breathe a sigh of relief, all you payers of state and local income taxes. The tax bill under consideration will help you.

Or not.

House Ways and Means Chairman Kevin Brady (R-Texas) announced to reporters today (Thursday, Dec. 14) that conference committee members — or at least the Republican conferees — have agreed to expand the state and local tax, aka SALT, deduction in the final version of H.R. 1, the Tax Cuts and Jobs Act.

Taxpayers who itemize will be able to deduct up to $10,000 in state income, sales and property taxes.

Some income, sales tax will still be deductible: That's right. Folks living in states with high income taxes such as New York, New Jersey and California will be able to claim those amounts if they itemize deductions.

And my neighbors and I here in no-income-tax Texas will be able to claim the state and local sales taxes we pay.

In the original House and then Senate-amended versions, state and local income and sales taxes weren't allowed as Schedule A deductions.

Both bills did, however, allow federal filers to claim up to $10,000 in real estate taxes, i.e., the property taxes homeowners get from their county (or parish) tax assessor-collectors every year, as an itemized tax deduction.

That $10,000 limit remains, but now covers state and local income and sales taxes, too.

So if your home's property tax was $4,000 and you paid state income tax of $8,000 you can claim $10,000 of those $12,000 in state taxes on your Schedule A.

Still not enough for some: But as I mentioned in an earlier post discussing the property tax itemized claim, the 10 grand cap is not going to do a lot of people any good at tax deduction time.

The reason is that the standard deduction amounts will be substantially increased. There's no word yet on which deduction figures the final bill will contain. The House-proposed standard deductions would be:

  • $12,200, single filers
  • $18,300, head of household
  • $24,400, married joint filers

In the Senate, they would be:

  • $12,000, single filers
  • $18,000, head of household
  • $24,000, married joint filers

Either set of deductions or a meeting in the middle of the two would make the $10,000 SALT write-off, regardless of which state and local taxes were claimed on Schedule A, worthless for many filers since it won't be enough to make itemizing worthwhile.

To get to that point, itemizing taxpayers also would need to claim charitable donations and/or medical expenses, which reportedly also will remain in some form in the final tax bill.

Of course, every taxpayer's situation is unique, so we'll all have to do the math once we see a final tax bill to determine whether we'll be helped, hurt or stay essentially the same tax-wise under the GOP bill.

Final bill details expected soon: We could be doing the calculations as soon as tomorrow.

Brady has scheduled signing of the conference report signature sheets — these are the documents that formally detail the deal between the House and Senate conference committee members and the support for them by a majority of the involved lawmakers — for between 10 a.m. and noon on Friday, Dec. 15.

After that's done, the details will be made public.

Then the debate — on Capitol Hill, in statehouses across the country, in the media and among taxpayers — will once again begin in earnest as the House and Senate look to vote on the final tax bill next week.

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Gary W.

The article fails to mention that the exemptions reduction to taxable income will also be going away which will negate most, if not all, of the benefit of the higher standard deduction for those who do not itemize.

Kay Bell

Arden, the key is the payment date. If you paid in 2018, regardless of for what tax year, then it's a 2018 expense and is subject to the $10K cap. Kay

Arden Eby

How about state tax payments paid for a prior year, but paid in 2018. are they subject to the $10,000 limitation?

yvonne johnston

I have several rental properties in California. can I claim all the property taxes on them since I claim the rent income?

Kay Bell

yes, Robert, $10,000 for singles and married jointly filing couples. The conference says the only difference is $5,000 for married couples filing separate returns. Seems unfair given prior (and usual) tax law to married couples.

Kay Bell

Hmmm, John, this post specifically is about the adding of the income and/or sales tax to the prior $10K property tax deduction amount. Those added SALT amounts are mentioned several times. I'm sorry that isn't clear to you.

John Gill

You forgot to mention that home mortgage interest is deductible which along with the tax and contribution deductions could put you over the $24,000 limit ( married joint taxpayers)


10000 limit for individuals AND for couples filing jointly?

Kay Bell

$10,000 in a combination of property and state income or state sales taxes is all that is allowed on one Schedule A.

Jonellen Reid

Is the $10,000 cap on property tax on EACH property I own, or just a total. My husband and I own rental property, so this is really going to hurt if we can't take up to that amount on each property.

C Sze

Hi Kay,
Do you know if the dependent's standard deduction also increase to $12,000 or $12,200?

At present, the dependent's standard deduction is the greater of (a) $1,050 or (b) $350 plus the dependent's earned income (up to $6,000).


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