Maybe You Won’t Lose That Property Tax Deduction After All

This post is in: Blog, Real Estate
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Starting with 2018 tax returns, individuals will face a cap of $10,000 on the combination of state income tax and real estate property taxes when they itemize.

New Jersey, New York and Connecticut have recently passed a workaround to allow homeowners to contribute to local charities instead of paying property tax. Charitable contributions are fully deductible. In fact, the amount you can deduct has been increased from 50% of adjusted gross income to 60% of adjusted gross income.

If the IRS allows this scheme to stand, it could mean a big difference for taxpayers in those states. In 2015, the average SALT (state and local tax) was $22,169 for NY, $17,850 in NJ and $19,665 in CT. In 2018, those amounts would be limited to just $10,000. The difference could be contributed to charity to keep the deduction. Maybe.

Time will tell if this will stand up to IRS scrutiny.

One Comment

  1. Myriam Mourani says:

    That would be great if this passes the “IRS smell test.” I guess it would have to do with charity being voluntary and taxes being mandatory. If this does end up being blessed by the IRS, then I guess private schools can do the same thing: if you make a contribution to your child’s private school, get credit for tuition, then you can, in essence, deduct your child’s private school tuition, right? Sweet.

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