State tax deduction 10k cap

By July 25, 2018IRS Tax

State tax deduction 10k cap
Under the new tax regulations, the state and local tax deduction is capped at 10k. What does that mean?
Assume you paid $6,000.00 in property tax, $12,000.00 in State income tax, and you purchased a car and paid $2000.00 in tax in a given year. Prior to the tax reform, you would have been able to take a $20,000.00 tax deduction on your Schedule A of form 1040 as an itemized deduction. Property tax, State level income tax, and Sales tax (it’s always state), are all forms of state and local taxes.  This little deduction could have saved you at least $6000.00 on your Federal income tax return.
Under the new rules, you are limited to only taking $10,000.00 as a deduction on your Federal income tax return for state and local taxes. In the scenario above, your tax break would be approximately $3000.00.  Moving forward, the more your earn and/or the more you pay in property tax is meaningless as it pertains to the state and local tax deduction.
State tax deduction 10k cap

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