CDZ State and local tax limitation on tax deductibility

[task0778]

Show me a link that shows how anybody gets around the $10,000 maximum deduction for SALT, property, or sales taxes paid in total. I could see it if you're running a business at home you might get away from the limit for the deduction limit on property tax but otherwise there's gotta be more to it.

Do you know any pass-through business owners who don't conduct their company's business from their home as well as from other locales? For any who do, that's all that's, along with having expensive-enough dwelling needed to evade the $10K limitation.

Perhaps what you're overlooking that for pass-through entity owners, the deduction is taken on Schedule C or Schedule E, not on Schedule A, the latter being where non-business-owners must take the SALT deduction? Schedule A deductions are "post-AGI" deductions, whereas Schedule C and E deductions are "pre-AGI" ones. All Schedule A deductions, AFAIK, have a floor or ceiling that limits the deductibility of whatever specific type of deduction one may there record, whereas, I'm not aware of any Schedule C or E deductions, other than the net operating loss deduction, that are limited.

Though I will next week meet with my tax advisor to learn more details, as things currently stand and as has been implied by my advisor, one can qualify one's residence for the 10K SALT exception under the "regular use" rule pertaining to the use of one's home for business purposes.

• Read this first --> Deducting Business Expenses | Internal Revenue Service
  
• Read this second --> Publication 587 (2016), Business Use of Your Home | Internal Revenue Service
  
• Then read this --> "regular use" qualification requirements

I've not yet been made aware of there being any change to the "regular use" rule; however, I'm sure that if that rule has changed, I'll next week find out about it having been changed.


As for your explicit request about the loophole pertaining to pass-through entity owners, I've only seen one mention of it on the Internet. That's not to say there are not others, but rather that I found one and stopped looking. (I don't generally look on the Internet for corroboration of information my tax advisor conveys; I trust that he knows what he's talking about.) I looked because I'm not willing to share here the additional details (specific phrasing) included in the letter I received from my tax advisor.


Then there is the matter of the "11th hour carve out" for Trump and his family and the small few others like him.

First of all, after 5 days of this new tax plan being out there, I have seen absolutely NOTHING from anybody on the web or in the media about any anybody who can avoid the $10,000 limit on the SALT deduction. I am not believing that the NYT, WaPo, HuffPo, and others have not identified this and pointed this out and bitched about it as a way for the rich guys to avoid the limit. I don't care what was in Trump's tax plan, I don't care what was in the House bill, and I don't care what the current IRS law is now before the tax bill goes into effect. All I care about is what is in the final tax bill that will be voted on the next few days, your tax advisor not withstanding. Ask him for where in the new tax bill he found where the exceptions are to get around that limit.


As for the 11th hour carve out, if I understand it right it's probably there more for people who have owned farms and ranches for generations. I highly doubt that the provision you refer to was done just for Trump as you imply. Nobody on either side is going to allow that, get real.

OT:

I don't care what was in Trump's tax plan, I don't care what was in the House bill, and I don't care what it is now before the tax bill goes into effect. All I care about is what is in the final tax bill that will be voted on the next few days, your tax advisor not withstanding.

While insouciance of the sort you attest to having is certainly your right to have, that sort of disinterestedness materially comprises why the middle class in the U.S. find themselves on the short end of the tax "stick."​

C'mon dude, who gives a crap about what was in Trump's plan or the House bill or the Senate bill? The only thing that matters is what is about to be signed into law if it passes through Congress in the next few days. You can blather all you want about anything else all you want but it means absolutely nothing. And BTW, the middle class are getting a bigger relative tax cut than the rich guys are.

You just keep thinking that....

And you can keep on making stuff up and spewing the dem party line.

 

[usmbguest5318]

Show me a link that shows how anybody gets around the $10,000 maximum deduction for SALT, property, or sales taxes paid in total. I could see it if you're running a business at home you might get away from the limit for the deduction limit on property tax but otherwise there's gotta be more to it.

Do you know any pass-through business owners who don't conduct their company's business from their home as well as from other locales? For any who do, that's all that's, along with having expensive-enough dwelling needed to evade the $10K limitation.

Perhaps what you're overlooking that for pass-through entity owners, the deduction is taken on Schedule C or Schedule E, not on Schedule A, the latter being where non-business-owners must take the SALT deduction? Schedule A deductions are "post-AGI" deductions, whereas Schedule C and E deductions are "pre-AGI" ones. All Schedule A deductions, AFAIK, have a floor or ceiling that limits the deductibility of whatever specific type of deduction one may there record, whereas, I'm not aware of any Schedule C or E deductions, other than the net operating loss deduction, that are limited.

Though I will next week meet with my tax advisor to learn more details, as things currently stand and as has been implied by my advisor, one can qualify one's residence for the 10K SALT exception under the "regular use" rule pertaining to the use of one's home for business purposes.

• Read this first --> Deducting Business Expenses | Internal Revenue Service
  
• Read this second --> Publication 587 (2016), Business Use of Your Home | Internal Revenue Service
  
• Then read this --> "regular use" qualification requirements

I've not yet been made aware of there being any change to the "regular use" rule; however, I'm sure that if that rule has changed, I'll next week find out about it having been changed.


As for your explicit request about the loophole pertaining to pass-through entity owners, I've only seen one mention of it on the Internet. That's not to say there are not others, but rather that I found one and stopped looking. (I don't generally look on the Internet for corroboration of information my tax advisor conveys; I trust that he knows what he's talking about.) I looked because I'm not willing to share here the additional details (specific phrasing) included in the letter I received from my tax advisor.


Then there is the matter of the "11th hour carve out" for Trump and his family and the small few others like him.

First of all, after 5 days of this new tax plan being out there, I have seen absolutely NOTHING from anybody on the web or in the media about any anybody who can avoid the $10,000 limit on the SALT deduction. I am not believing that the NYT, WaPo, HuffPo, and others have not identified this and pointed this out and bitched about it as a way for the rich guys to avoid the limit. I don't care what was in Trump's tax plan, I don't care what was in the House bill, and I don't care what it is now before the tax bill goes into effect. All I care about is what is in the final tax bill that will be voted on the next few days, your tax advisor not withstanding. Ask him for where in the new tax bill he found where the exceptions are to get around that limit.


As for the 11th hour carve out, if I understand it right it's probably there more for people who have owned farms and ranches for generations. I highly doubt that the provision you refer to was done just for Trump as you imply. Nobody on either side is going to allow that, get real.

First of all, after 5 days of this new tax plan being out there, I have seen absolutely NOTHING from anybody on the web or in the media about any anybody who can avoid the $10,000 limit on the SALT deduction.

??? I provided in the post to which you replied the link to the discussion of which I'm aware and that pertains to avoiding the SALT ceiling. What more do you expect me to do? (BTW, that question is rhetorical.) Were you to click on that link, you'd see what I've about it seen on the Internet.

The only pertinent link (in November) I see from you refers to the House bill rather than the final bill and they ain't the same. To repeat: there is no mention anywhere that indicates that final tax bill allows anybody to avoid the $10,000 SALT deduction limit. NOTHING. There are numerous articles and columns about what's in that final bill, yet there is NOTHING, not even from the left-wing websites that says ANYTHING about any such loophole or exception.

The only pertinent link (in November) I see from you refers to the House bill rather than the final bill and they ain't the same.

How much of the linked content in the post 8 passage below did you not read?

Perhaps what you're overlooking that for pass-through entity owners, the deduction is taken on Schedule C or Schedule E, not on Schedule A, the latter being where non-business-owners must take the SALT deduction? Schedule A deductions are "post-AGI" deductions, whereas Schedule C and E deductions are "pre-AGI" ones. All Schedule A deductions, AFAIK, have a floor or ceiling that limits the deductibility of whatever specific type of deduction one may there record, whereas, I'm not aware of any Schedule C or E deductions, other than the net operating loss deduction, that are limited.

Though I will next week meet with my tax advisor to learn more details, as things currently stand and as has been implied by my advisor, one can qualify one's residence for the 10K SALT exception under the "regular use" rule pertaining to the use of one's home for business purposes.

• Read this first --> Deducting Business Expenses | Internal Revenue Service
• Read this second --> Publication 587 (2016), Business Use of Your Home | Internal Revenue Service
• Then read this --> "regular use" qualification requirements

I've not yet been made aware of there being any change to the "regular use" rule; however, I'm sure that if that rule has changed, I'll next week find out about it having been changed.

 

[Toronado3800]

Supposedly the cut in the tax rates is supposed to make up for the limits on the SALT deductions.

Do any of your clients have children?

• If so, what has your detailed analysis of the termination of personal exemptions (~$4K/individual) in comparison to the increased standard deduction and child care credit revealed?
  • At what point do the increased standard deduction and changes to the child care credit cease to exceed the sums excludable from taxable income under the pre-GOP-bill tax code?

You need to look at the whole tax picture.

Run it side by side under the old and new law.

You can't just cherry pick provisions that you like or don't like.

I like the SALT limitations.

And overall this is a huge tax cut for the rich who are the ones with the big SALT deductions, mostly property tax.

Calif and NYS will be pressured to drop their taxes too since the Feds will no longer subsidize them.

Seriously? That's nebulous drivel is your response to a very specific question that is more than apropos to ask you...Either your clients (in their business capacity as your clients) have children or they don't. If they do, and you are a first-rate financial advisor, you'll have performed the analysis of which I asked because it's the most basic analysis that every such advisor can perform.

For individuals who did not itemize in 2017 and won't in 2018, the analysis is simple:

2017 Calculation:

AGI
Less: Standard deduction ($6,350 or $12,700)
Less: $4050 per household individual, dependent, or spouse (personal exemptions)
Less: Qualified child tax credit (the refundable $1K/kid CTC phases out in direct proportion to income)
Total 2017 federal income tax liability
​

2018 Calculation:

AGI
Less: Standard deduction ($12,200 or $24,400)
Less: Qualified child tax credit (click here for the new terms of the CTC)
Total 2018 federal income tax liability
​

To obtain a visual depiction, simply perform the calculations assuming the taxpayer qualifies for the full credit and full refundability (because people who don't are wealthier, though not at all wealthy) and graph the two 2017 equations and the two for 2018. Where the 2018 line crosses any given 2017 line is found the point whereafter the 2017 provisions result in a lower tax liability for filers to whom the given 2017 line applies and who, in determining their taxable income, are entitled to nothing more than the noted exclusions.

When comparing the financial impact of a tax provision, one must identify and evaluate the "apples to apples" provisions. In the case of the standard deduction and personal exemptions, they are the only provisions for which everyone potentially qualifies simply by dint of humans being within a given taxpayer's household.


FWIW, the two basic equations, absent the CTC component are:

• 2017
  • y = 4050x + 6350
  • y = 4050x + 12,700
• 2018
  • y = 12,200
  • y = 24,400

Insofar as you purport to be some sort of financial analyst (see quoted passage below), I'll leave you to derive the function for the CTC component. It's not hard, but it's the least you can contribute to this discussion given your remarks.

I have not yet dove into the pass-thru provisions in the new tax act. None of my clients is a pass-thru so not at the top of my list.

Are you any kind of tax/financial advisor, strategist, or planner? My advisor has performed that analysis, albeit with regard to the loss of the personal exemption and changes to itemized deduction provisions rather than with regard to the standard deduction. (I don't qualify for the CTC.) Obviously, one cannot perform an itemized-deduction-based analysis for anyone whose details one doesn't know.

Off topic:

You do some math dude! Where do you find the time.

Yesterday besides work and kid time I changed three toilet fill valve mechanisms. I had one found one of the new ones I really liked when replacing one which was broke so I switched two others which were performing but only at minimum standards.

Then I did some light reading on the Battle of the Bulge in bed. That was it. I saw zero minutes of tv excepting the cartoon the kids had on in the morning.

Keep up the work!

 

[Boss]

The current GOP plan limits the SALT itemized deduction to $10K. That seemingly denies some measure of the SALT deduction folks take for their million-dollar-plus homes.

Hold on a minute. You are conflating the SALT deduction with home mortgage deduction. SALT is state and local tax deduction. This is the federal deduction you're allowed to claim for state and local income tax paid... has nothing to do with your home.

And it is being reformed to limit the deduction to $10k. Meaning, you will not be able to claim the FULL amount if over $10k. Not very many "middle class" or "working poor" folks are paying over $10k in state and local taxes. I'd say there are probably NONE.

I like eliminating the SALT deduction, I would have been fine with eliminating it entirely. I think doing that would give incentive to states to lower taxes. And let's be honest, the vast majority of taxpayers, especially in the lower echelon, don't itemize and aren't effected by the SALT deduction.

 

[task0778]

The current GOP plan limits the SALT itemized deduction to $10K. That seemingly denies some measure of the SALT deduction folks take for their million-dollar-plus homes.

Hold on a minute. You are conflating the SALT deduction with home mortgage deduction. SALT is state and local tax deduction. This is the federal deduction you're allowed to claim for state and local income tax paid... has nothing to do with your home.

And it is being reformed to limit the deduction to $10k. Meaning, you will not be able to claim the FULL amount if over $10k. Not very many "middle class" or "working poor" folks are paying over $10k in state and local taxes. I'd say there are probably NONE.

I like eliminating the SALT deduction, I would have been fine with eliminating it entirely. I think doing that would give incentive to states to lower taxes. And let's be honest, the vast majority of taxpayers, especially in the lower echelon, don't itemize and aren't effected by the SALT deduction.

Xelor believes that there is something in the new tax bill that allows rich guys to bypass the $10k limit on the SALT deduction yet has shown nothing to show where he got that information other than obscure references and a conversation with his tax guy. Perhaps I am mistaken, but I think the $10k limit on deductions INCLUDES your property tax AND your State and Local taxes. But that limit does not include the mortgage interest deduction, which I think is also capped. I have yet to see anything that indicates a pass through business gets to avoid that $10k limit on SALT. What he shows is the current tax code and rules rather than anything from the new tax code, and to date NOBODY has indicated that the old way is still in effect. All I see everywhere I look is the same statement on the $10k limit on SALT deductions in the new tax law with NO mention of pass throughs or anyone else getting around that.

 

[usmbguest5318]

Supposedly the cut in the tax rates is supposed to make up for the limits on the SALT deductions.

Do any of your clients have children?

• If so, what has your detailed analysis of the termination of personal exemptions (~$4K/individual) in comparison to the increased standard deduction and child care credit revealed?
  • At what point do the increased standard deduction and changes to the child care credit cease to exceed the sums excludable from taxable income under the pre-GOP-bill tax code?

You need to look at the whole tax picture.

Run it side by side under the old and new law.

You can't just cherry pick provisions that you like or don't like.

I like the SALT limitations.

And overall this is a huge tax cut for the rich who are the ones with the big SALT deductions, mostly property tax.

Calif and NYS will be pressured to drop their taxes too since the Feds will no longer subsidize them.

Seriously? That's nebulous drivel is your response to a very specific question that is more than apropos to ask you...Either your clients (in their business capacity as your clients) have children or they don't. If they do, and you are a first-rate financial advisor, you'll have performed the analysis of which I asked because it's the most basic analysis that every such advisor can perform.

For individuals who did not itemize in 2017 and won't in 2018, the analysis is simple:

2017 Calculation:

AGI
Less: Standard deduction ($6,350 or $12,700)
Less: $4050 per household individual, dependent, or spouse (personal exemptions)
Less: Qualified child tax credit (the refundable $1K/kid CTC phases out in direct proportion to income)
Total 2017 federal income tax liability
​

2018 Calculation:

AGI
Less: Standard deduction ($12,200 or $24,400)
Less: Qualified child tax credit (click here for the new terms of the CTC)
Total 2018 federal income tax liability
​

To obtain a visual depiction, simply perform the calculations assuming the taxpayer qualifies for the full credit and full refundability (because people who don't are wealthier, though not at all wealthy) and graph the two 2017 equations and the two for 2018. Where the 2018 line crosses any given 2017 line is found the point whereafter the 2017 provisions result in a lower tax liability for filers to whom the given 2017 line applies and who, in determining their taxable income, are entitled to nothing more than the noted exclusions.

When comparing the financial impact of a tax provision, one must identify and evaluate the "apples to apples" provisions. In the case of the standard deduction and personal exemptions, they are the only provisions for which everyone potentially qualifies simply by dint of humans being within a given taxpayer's household.


FWIW, the two basic equations, absent the CTC component are:

• 2017
  • y = 4050x + 6350
  • y = 4050x + 12,700
• 2018
  • y = 12,200
  • y = 24,400

Insofar as you purport to be some sort of financial analyst (see quoted passage below), I'll leave you to derive the function for the CTC component. It's not hard, but it's the least you can contribute to this discussion given your remarks.

I have not yet dove into the pass-thru provisions in the new tax act. None of my clients is a pass-thru so not at the top of my list.

Are you any kind of tax/financial advisor, strategist, or planner? My advisor has performed that analysis, albeit with regard to the loss of the personal exemption and changes to itemized deduction provisions rather than with regard to the standard deduction. (I don't qualify for the CTC.) Obviously, one cannot perform an itemized-deduction-based analysis for anyone whose details one doesn't know.

Off topic:

You do some math dude! Where do you find the time.

Yesterday besides work and kid time I changed three toilet fill valve mechanisms. I had one found one of the new ones I really liked when replacing one which was broke so I switched two others which were performing but only at minimum standards.

Then I did some light reading on the Battle of the Bulge in bed. That was it. I saw zero minutes of tv excepting the cartoon the kids had on in the morning.

Keep up the work!

You do some math dude! Where do you find the time.

Well, in all honesty, the "math" I did for that post took all of a few seconds. Linear equations and deriving them are, after all, seventh grade math. Moreover, as I've noted elsewhere (though I have no idea of whether you've happened upon the posts in which I did so), I have a graduate business degree. The math of taxes is among the things seekers of such a degree are expected to know.

Thus, the direct answer to "where do I find the time" to do the sort of math one'll see me present in posts here is that I found the time and obtained the noted ability ages and ages ago when I chose not to "sleep though" the classes I took in K-12 school, college and graduate school. There is another factor: I'm semi-retired. I have withdrawn, for example, from nearly all the selling and practice management responsibilities/activities typical of senior partners in professional services firms, thereby leaving me rarely with more than four hours of firm-related work to do each day. (Were it not for several clients insisting that I retain oversight control for the engagements I commenced with them, I'd now be fully retired.)

I did some light reading

I too do a bit of daily reading. Some of it "light," some of it not, and some of it, most notably many but not all of the posts I read on USMB, so "light" that it's f*cking insipid. LOL (And I hope I don't need to say so, but JIC I do, no, I'm not "hinting," so don't take it that way.)

 

[usmbguest5318]

The current GOP plan limits the SALT itemized deduction to $10K. That seemingly denies some measure of the SALT deduction folks take for their million-dollar-plus homes.

Hold on a minute. You are conflating the SALT deduction with home mortgage deduction. SALT is state and local tax deduction. This is the federal deduction you're allowed to claim for state and local income tax paid... has nothing to do with your home.

And it is being reformed to limit the deduction to $10k. Meaning, you will not be able to claim the FULL amount if over $10k. Not very many "middle class" or "working poor" folks are paying over $10k in state and local taxes. I'd say there are probably NONE.

I like eliminating the SALT deduction, I would have been fine with eliminating it entirely. I think doing that would give incentive to states to lower taxes. And let's be honest, the vast majority of taxpayers, especially in the lower echelon, don't itemize and aren't effected by the SALT deduction.

Xelor believes that there is something in the new tax bill that allows rich guys to bypass the $10k limit on the SALT deduction yet has shown nothing to show where he got that information other than obscure references and a conversation with his tax guy. Perhaps I am mistaken, but I think the $10k limit on deductions INCLUDES your property tax AND your State and Local taxes. But that limit does not include the mortgage interest deduction, which I think is also capped. I have yet to see anything that indicates a pass through business gets to avoid that $10k limit on SALT. What he shows is the current tax code and rules rather than anything from the new tax code, and to date NOBODY has indicated that the old way is still in effect. All I see everywhere I look is the same statement on the $10k limit on SALT deductions in the new tax law with NO mention of pass throughs or anyone else getting around that.

Xelor believes that there is something in the new tax bill that allows rich guys to bypass the $10k limit on the SALT deduction yet has shown nothing to show where he got that information other than obscure references and a conversation with his tax guy.

Among the reference I provided is the tax code itself. I provided links to the specific IRS website pages where those provisions, which remain unaltered by the GOP tax bill (I also provided the link to the conference committee bill that the House and Senate will pass), are found and explained. I also provided links to the damn schedules (forms) on which one'd record the deduction!

• CDZ - State and local tax limitation on tax deductibility
  
• CDZ - State and local tax limitation on tax deductibility

F*ckin'-a! Read the provisions! Do you really need to f*cking be spoon-fed!?!? If so, I'm not posting here to do that for you or anyone else.

And I think I can safely assert that few if any members provide the depth and breadth of credible reference links and rigorously researched (by myself or by the authors of the documents I provide in my links) content that I do, and I can count on one, maybe two, hands the number of members who bother to read that content. So if the nature and extend of "spoon-feeding" you get from me isn't enough, I dare say that you won't ever get enough with regard to matters that transcend the comprehension of a five-year-old.

All I see everywhere I look is the same statement on the $10k limit on SALT deductions in the new tax law with NO mention of pass throughs or anyone else getting around that.

Obviously, you aren't looking in the right places, in spite of the fact that I provided links to the right places to look. Below is the basic "formula" for everyone's 1040 form.

Gross income (income from all sources)
Less: "Above the line" deductions (aka pre-AGI deductions)
Adjusted gross income (AGI)
Less: the greater of the standard deduction or the sum of allowed itemized deductions
Taxable income
Times: applicable tax rate
Provisional income tax
Less: allowed tax credits
Gross tax liability for the tax year
Less: taxes paid during the tax year
Current income tax liability -- This sum is what one must pay, usually no later than April 15th.​

Using the information I've already provided, figure out how qualifying taxpayers (rich or not) can take more than $10K in SALT deductions.

Xelor believes that there is something in the new tax bill that allows rich guys to bypass the $10k limit on the SALT deduction yet has shown nothing to show where he got that information other than obscure references and a conversation with his tax guy.

I've been very clear about the fact that it's not just "any" rich guys who can bypass the limitation. Did you also not read the qualifying remarks to that effect?

 

[Staidhup]

So how many Americans live in a high valued home subject to property taxes in excess of $10,000? What is the income threshold determining when a tax payer itemizes their deductions? So who are these individuals that will be effected?
Maybe if individuals paid closer attention to who they elect to govern their communities, cities, and states this problem would be addressed. Look at the 10 highest taxed states, cities, and communities and what do you see, liberal strongholds, why is that?

 

[usmbguest5318]

So how many Americans live in a high valued home subject to property taxes in excess of $10,000? What is the income threshold determining when a tax payer itemizes their deductions? So who are these individuals that will be effected?
Maybe if individuals paid closer attention to who they elect to govern their communities, cities, and states this problem would be addressed. Look at the 10 highest taxed states, cities, and communities and what do you see, liberal strongholds, why is that?

Maybe if individuals paid closer attention to who they elect to govern their communities, cities, and states this problem would be addressed.

I can assure you it would not. The elected leaders at state and lower levels of government do not design and enact federal income tax provisions. Whether SALT is not at all, wholly or partially deductible is entirely a matter of whether members of Congress make it so. The issue here under discussion isn't the magnitude of one's state and local taxes, it's whether one gets to deduct them from one's income when calculating one's federal income tax liability.

 

[Staidhup]

Why should American Tax Payers, in essence, be forced to subsidize those that choose to live in financially troubled states? When ones states financial stability necessitates high tax rates why should the balance of the country bail them out? I firmly believe one should not be granted the ability to deduct one's tax's paid in the state they so choose to live. It is ones choice, they have the freedom to choose, where they live. Congress has the federal government to look after, which is a financial mess ,and in no way should be subsidizing states due to incompetence, that rests upon the residents of the state and heads of the people they elect to represent them.

 

[usmbguest5318]

Why should American Tax Payers, in essence, be forced to subsidize those that choose to live in financially troubled states? When ones states financial stability necessitates high tax rates why should the balance of the country bail them out? I firmly believe one should not be granted the ability to deduct one's tax's paid in the state they so choose to live. It is ones choice, they have the freedom to choose, where they live. Congress has the federal government to look after, which is a financial mess ,and in no way should be subsidizing states due to incompetence, that rests upon the residents of the state and heads of the people they elect to represent them.

I firmly believe one should not be granted the ability to deduct one's tax's paid in the state they so choose to live.

Okay. You're entitled to that. I don't agree with you, but also I don't care to discuss the matter further with you.