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SALT Tax Changes

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Friday, January 31, 2020

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. 

 

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 516-921-4200 Visit our website: www.davidlerner.com

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Contact

Jake Mendlinger
Account Manager
Zimmerman/Edelson
516.829.8374 X 232
jmendlinger@zimmed.com

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