Tax Reform Limits State and Local Tax Deduction

25-Jan-2018

One of the areas affected by the Tax Cuts and Jobs Act (TCJA) is individual itemized deductions.  This article will address one specific itemized deduction, among several, that will be impacted.

There is a new limit placed on individual's itemized deductions of various kinds of nonbusiness taxes which became effective beginning with the 2018 tax year.

Before the changes were effective, individuals were permitted to claim deductions for various nonbusiness taxes such as state income taxes, real estate taxes and personal property taxes (ie car tags).  In some cases, taxpayers could deduct sales taxes if those taxes exceeded their state income taxes.

For tax years 2018 through 2025, the Act limits deductions for taxes paid by individual taxpayers in several ways. It limits the aggregate itemized deduction for the combined real property taxes, personal property taxes, state and local income taxes and sales taxes for any tax year to $10,000 ($5,000 for married people filing separately). 

There is an exception to this limit:  It does not apply to state, local or foreign real property taxes or to personal property taxes if those taxes are paid or accrued in carrying on a trade or business or in an activity engaged in for the production of income.

This new limit makes it vital that you consult with your professional tax advisor to analyze your individual tax situation.

Additional articles regarding other changes to itemized deductions by TCJA will be coming soon. 

Melanie S. Woodrick is a member of GranthamPoole PLLC and a recognized leader in planning and compliance in the fields of non-profit and real estate taxation.  She has also written, taught, and spoken on many topics in the area over the years. Please contact Melanie at mwoodrick@granthampoole.com, www.linkedin.com/in/melanie-woodrick, or 601-499-2400.

***The above does not represent tax advice.  Each situation is fact-dependent, and you should seek the advice of a competent advisor. GranthamPoole PLLC is a provider of tax, accounting, advisory and strategic services, partnering with clients across a broad spectrum of industries and sizes.




QuickBooks Certified ProAdvisor - QuickBooks Online Certification

Jackson Metro:

1062 Highland Colony Parkway
Suite 201 Ridgeland, MS 39157
Phone: 601-499-2400
Fax: 601-499-2401

Oxford:

1200 Jefferson Avenue, Suite 206
Oxford, MS 38655
Phone: 662-234-8130
Fax: 662-234-8892

News

27-Mar-2018

Tax Planning Opportunities – Renovations of Commercial Real Estate

In our earlier installment about How Tax Reform Affects Owners of Commercial Real Estate (http://www.granthampoole.com/announcements/how-tax-refor.. Read More

14-Mar-2018

Alimony and the New Tax Act

The Tax Cuts and Jobs Act (the Act) ushered in significant tax reforms for both individuals and businesses with its passage last December. Most o.. Read More

07-Mar-2018

Regulations Soon Issued for Carried Interest Limitations

The IRS announced it will be releasing regulations clarifying limitations around carried interests in S corporations in light of the new tax law. .. Read More

05-Mar-2018

Interest on Home Equity Loans

The IRS recently advised taxpayers that in many cases, the interest paid on their home equity loans is still deductible under the new tax law. For.. Read More

26-Feb-2018

529 Plans After Tax Reform – Better Than Before

Qualified tuition plans, also known as “529 plans” in reference to the applicable Internal Revenue Code Section, have been around for .. Read More

19-Feb-2018

GranthamPoole PLLC Tax Reform Seminar

Listen in as our experts discuss some of the important changes in the tax code at our recent Tax Reform Seminar. The seminar covers changes such as in.. Read More

07-Feb-2018

Effect of the Tax Cuts and Jobs Act on Valuations

The wide-reaching provisions of the Tax Cuts and Jobs Act (TCJA) will significantly affect values of businesses and assets. Small business owners.. Read More

25-Jan-2018

Tax Reform Limits State and Local Tax Deduction

One of the areas affected by the Tax Cuts and Jobs Act (TCJA) is individual itemized deductions. This article will address one specific itemized .. Read More

16-Jan-2018

Estate Planning Considerations as a Result of Tax Reform

The Tax Cuts and Jobs Act of 2017 (TCJA) reduces individual and corporate income tax rates, removes a multitude of credits and deductions, enhance.. Read More

10-Jan-2018

Pass-Through Deduction and Tax Rate Drops in Action

We discussed recently a brief overview of the new tax rate changes for both corporations and individuals, as well as the new pass-through deductio.. Read More

View All News...

Want us to stay in touch?

* Required
Captcha Image


Copyright © 2014-2017 GranthamPoole PLLC
MS Firm Permit Number F0338