Why the fight over SALT deductions matters to you

Finance

ROCHESTER, N.Y. (WROC) — Deductions for state and local taxes can make a big difference when it comes to the amount of money you owe the federal government.

CPA Scott Adair discussed SALT — state and local tax — deductions Thursday during News 8 at Sunrise.

“SALT is the state and local taxes that you pay as an income taxpayer, so any resident who pays either sales tax, property tax, or any sort of state income tax,” explained Adair. “First of all you have to be able to itemize on your federal income tax return and you get a deduction for any state and local income taxes as I defined earlier on that income tax return – if you itemize. If you use the standard deduction this does not apply to you.”

Adair said in New York, where we have relatively high taxes — whether it be property, state, or local taxes — many homeowners and higher wage earners historically were able to take advantage of SALT deductions. The deduction was limited as part of the Tax Cuts and Jobs Act in 2017.

Gov. Andrew Cuomo has called for the federal government to repeal the SALT tax limitations. He’s not alone. “Senator Schumer and Congressman Suozzi both have a bill presently in Washington regarding the repeal of the SALT tax limitation,” noted Adair. “About three years ago the federal government put in a limitation of $10,000 that you can deduct. Previously this was an unlimited deduction so you got full credit for any state and local taxes that you paid.”

Adair said the SALT deductions have an impact on all states, but New York especially. “One of the big things that people are talking about is that this reduction in this deduction has forced people to look elsewhere — as far as living arrangements go — because of the lack of deductibility of all of the taxes that we pay. But it also goes back to the point that the Governor has made multiple times in the past year as to how much New York pays into the federal government but receives less benefit from the federal government. So it’s sort of a balancing act between how much we pay in as New York State residents versus how much we get back from the federal government in the form of support.”

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