Lately, the national news has been filled with people who are discovering that the new tax law has them paying more to Uncle Sam than they previously had to pay. As we enter the height of tax season, many of us here in Florida are not among those people, due to our relatively low property tax and other state taxes.
The new law made many changes that impact families, like increasing the standard deduction to $12,000 for individuals and $24,000 for families (so a lot of people won’t need to itemize their deductions); to eliminating all personal exemptions; to increasing the tax credit for families with children.
But one of the biggest changes in the new tax code is the cap on the deduction of state and local taxes, known as SALT. In prior years, people living in states that levy high taxes on their income, plus high property taxes—and in some places, city taxes too—were able to deduct all these taxes from their income. (It is allowed to deduct sales taxes instead of income taxes.)
Under the new tax law, this SALT deduction is limited to $10,000, no matter how much you actually pay in these taxes. This means that a family living in a high tax state who paid, say, $13,000 in property taxes (not unrealistic in places like Long Island, New York), plus state income taxes of, say, $18,000), aren’t able to deduct the whole $31,000. Instead, the law says they can deduct only $10,000 of the $31,000.
This cap on SALT is part of the reason experts expect only about 5 percent of taxpayers to benefit from itemizing their deductions this year, compared with nearly a third of taxpayers who did so in the past.
The average property tax in Broward County this year on a home with an assessed value of $250,000 (remember that assessed values often fall below a home’s market value) is $3,340. Since Florida has no state income tax, that entire amount can be deducted by anyone who itemizes on their tax form.
With the increase in the standard deduction, many people will be not be itemizing, but will instead take that standard deduction. But for those who still benefit from itemizing, our low local property taxes mean many Floridians won’t be losing any money when it comes to SALT. This is not the case for people living in high-tax states such as New York, New Jersey, Connecticut, California, Maryland, and others.
Of course, this positive treatment doesn’t hold for everyone in Florida. If your home has a high enough value, your property taxes could exceed the $10,000 cap.
If you think your own real-estate tax is high, though, consider that the most expensive home in the country’s history was just sold last month: an 11 bedroom (and 22 bathroom!) oceanfront mansion in Hillsboro Beach. This home sold for more than $42 million, so property taxes will inevitably be hundreds of thousands of dollars.
The tax benefit related to SALT is causing experts to predict that more Northeasterners from high state taxes may consider moving to Florida. Some who have already moved here cite the changing tax law as a key reason.
So this year, as you prepare your federal taxes, take a moment to appreciate the fact that Florida’s low real-estate and state income taxes are probably working in your favor. That’s another thing, aside from our glorious sunshine, to feel good about living here.
Having the Law Office of Gary M. Landau by your side during each step in a probate, will/trust, or real estate matter helps insure that the process goes as smoothly as possible. The Law Office of Gary Landau is located in Coral Springs, Florida, and is rated 10 out of 10 by the legal website AVVO. For more information, call 954-979-6566 or email us for a free consultation.
Law Office of Gary M. Landau P.A.
7401 Wiles Road, Suite 204
Coral Springs, FL 33067
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