11 Million Tax Filers to Face Property Tax Cap, Audit Reveals
February 27, 2019
The cap on property taxes will have widespread impact on millions of filers this year. Tax filers will no longer be able to deduct more than $10,000 in state and local taxes from their federal income taxes. An audit released on Tuesday from the U.S. Treasury Department shows that 11 million tax filers, of 150 million income tax returns, will face limits on their property tax write-offs.
The state and local tax deduction limits will largely impact homeowners in high-tax states, such as New Jersey, New York, and California. More than half of the tax increases from the SALT cap will affect the top 1 percent of income earners, according to the Independent Tax Policy Center in Washington, D.C.
However, tax filers who reach the SALT cap won’t necessarily see a rise in their total tax bill. Some filers may benefit from other parts of the 2017 Tax Cuts and Jobs Act, such as eliminating the alternative minimum tax, reducing marginal tax rates, or doubling the standard deduction that taxpayers may take, The New York Times reports.
Some lawmakers from high-tax states, such as New York and New Jersey, have proposed efforts to try to allow residents to work around the caps. One proposal was to classify local property tax payments as charitable contributions, which are deductible and not subject to the SALT cap, The New York Times reports.
But the IRS warned taxpayers earlier this year that such attempts likely will not work. “Despite these state efforts to circumvent the new statutory limitation on state and local tax deductions, taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes,” the IRS states. Read the IRS’ guidelines.
“SALT Limit Is Hitting 11 Million Tax Returns, Audit Finds,” The New York Times (Feb. 26, 2019)
Updated: May 24, 2019