SALT Tax Changes
The changes to state and local tax laws will affect many folks. For a large portion of taxpayers, it means less stability than before. The average refund is something that families rely on every year. It is no small amount either, clocking in at nearly six weeks’ take-home pay for the typical household. According to research, the average American might see the refund that they depend on fall to record lows. Your refund could be lower by up to 9 percent because of the changes in the tax code.
These changes to tax deduction amounts also referred to as the SALT deduction cap, are the primary reason for what might come as an unwelcome surprise to some. Taxpayers, no matter how much they earn, cannot deduct a penny over $10,000 of total state and local taxes, including property taxes. The government is happy about it as the White House Office of Management and Budget estimates that the cap on these deductions is saving the government over $57 billion.
However, the change could end up having a ripple effect on families that depend on the tax refund to help them get through the year. The refund helps American families achieve a more stable financial situation. If the change in state and local tax laws have a negative impact on you, try to figure out ways to lessen the blow by working on savings and investments as well as paying down debt, so that you have more independence and less reliance on loans.
The cash can be used for many things, but one big common point is to pay down debt, which in turn frees up more disposable income for them down the line. [3] Over 25 percent of Americans intend to use their refund to pay down some of their debt. Last year that figure was as high as 36 percent. Big cash outlays like out-of-pocket health care expenses or schooling for their children also might have to take a knock this year if the refund is less than budgeted for.
Make sure you know the changes to the rules and the effect they will have on you and your family. If you need to get professional advice, then, by all means, do so. Four states, including New York and New Jersey, recently sued the Treasury Department, Treasury Secretary Steven Mnuchin and the IRS, among others in an effort to change the SALT deduction cap back to the way it was before, but the judge threw the case out of court in September of last year.
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