Property Taxes and the new SALT Income Tax law (Houston: sales, mortgage)

[Hopeful for Life]

I just bought my first home in May and was waiting to see how the new $10,000/year limit would affect me. I’m just a few hundred over the limit for property tax (better than several thousand). But what about sales taxes? Are we still allowed to deduct for those? If so, I come out worse.

[WRM20]

Are you single or married? If you are married, the standard deduction is $24,000, for singles it's $12,000. If your total deductions don't exceed those amounts, don't worry about your tax amounts. The 10,000 limit appears to include sales tax, but I am not completely sure.

[Hopeful for Life]

Originally Posted by WRM20

Are you single or married? If you are married, the standard deduction is $24,000, for singles it's $12,000. If your total deductions don't exceed those amounts, don't worry about your tax amounts. The 10,000 limit appears to include sales tax, but I am not completely sure.

Single penalty strikes again! Pretty sure that taxes PLUS mortgage interest and charity (Sched A) would exceed the standard in my case. I know of a friend who was able to get married to a foreign “wife” and take advantage of all the free goodies that are bestowed on breeders. Congresscritters suck.

[chris_ut]

How is giving 2 people a 24,000 deduction versus 12,000 for a single some kind of advantage? Its just 12 times 2.

[LonghornHotspur]

Originally Posted by Hopelesscause

I just bought my first home in May and was waiting to see how the new $10,000/year limit would affect me. I’m just a few hundred over the limit for property tax (better than several thousand). But what about sales taxes? Are we still allowed to deduct for those? If so, I come out worse.

It used to be that you could deduct state income OR sales taxes (done as an equalization to states without an income tax like.....Texas) PLUS all your local taxes such as county/city/ISD/MUD property taxes (as long as based on value of your property)

Now, The new tax law limits deduction of all State and Local Taxes (thus SALT) to 10,000. This was done as a direct effort by the R's that controlled both the House and Senate at the time to punish generally higher tax blue states like New York and California. But in a place with out of control property taxes like Texas, middle class homeowner's get hammered ($10K in property taxes on a $300K home ex-homestead is 3%; plenty of places in Houston over that with MUDs.)

Thanks dotard

[Hopeful for Life]

Originally Posted by chris_ut

How is giving 2 people a 24,000 deduction versus 12,000 for a single some kind of advantage? Its just 12 times 2.

Simple math- the tax is based on the home’s value. If the annual tax rate is between $10,0001 -24,000, the tax rate is denying the single person the ability to deduct the ENTIRE amount of property tax deduction since the single is limited to $10,000. The married couple would be more likely to be able to deduct the ENTIRE AMOUNT. Not only that, the married couple is more likely to have children that use property tax-supported schools unless their kids go to private schools.

[WRM20]

Originally Posted by Hopelesscause

Simple math- the tax is based on the home’s value. If the annual tax rate is between $10,0001 -24,000, the tax rate is denying the single person the ability to deduct the ENTIRE amount of property tax deduction since the single is limited to $10,000. The married couple would be more likely to be able to deduct the ENTIRE AMOUNT. Not only that, the married couple is more likely to have children that use property tax-supported schools unless their kids go to private schools.

Married couples are limited to 10,000 SALT as well.

[kreeyax]

Originally Posted by WRM20

Married couples are limited to 10,000 SALT as well.

Probably irrelevant for most of us, as we'll just take the $24K standard deduction now. No need to itemize any more.

[Mandres]

Originally Posted by kreeyax

Probably irrelevant for most of us, as we'll just take the $24K standard deduction now. No need to itemize any more.

That's really the main takeaway. I'm involved with a couple of 501c(3) non-profits, and we're very concerned that the new rules will discourage charitable giving since it appears a lot of people will be now taking the standard deduction and therefore receive no tax benefit at all from donations.

[LonghornHotspur]

Originally Posted by Mandres

That's really the main takeaway. I'm involved with a couple of 501c(3) non-profits, and we're very concerned that the new rules will discourage charitable giving since it appears a lot of people will be now taking the standard deduction and therefore receive no tax benefit at all from donations.

Don't forget you lost your personal exemptions in the new law too (used to be about $4k per person/dependant in tax year 17) as well...so taking 24K standard deduction in 18 is compared to itemized + exemptions in '17 or before.

No way to know how it affects you personally unless you run both scenarios, as marginal rates and brackets changed too. I built it out on a spreadsheet and the new tax law is costing me about $1.5K

Thanks, dotard