• Skip to main content
  • Skip to header right navigation
  • Skip to site footer
Bautis Financial

Bautis Financial

Secure your Castle, Achieve your Dreams.

  • Schedule a Call
  • Podcasts
    • Agent of Wealth
    • Clear a Path
  • About
    • Our Approach
    • Our Team
    • Our Difference
  • Who We Work With
    • Individuals and Families
    • Small Business Owners
    • Retirees and Pre-Retirees
    • 401k Plan Sponsors
  • Insights
    • Blog
    • Business Valuation Advisor
    • College Planning Hub
    • Discover How
    • Learning Center
    • Risk Score
  • Client Access
    • Wealth Center
    • Orion

Tax Update: SALT and Charitable Deductions

June 21, 2018 by Marc Bautis

One of the most controversial changes that was part of the Tax Cut and Jobs Act of 2017 passed last December was concerning the deduction of state and local income taxes, more commonly known as SALT.

Prior to the December change, taxpayers were able to deduct from their federal taxes all ofthe state and local taxes they paid.  Usually state and local taxes include personal income tax, corporate income tax, sales tax, and property tax. These taxes are in turn used to pay for  public services such as public schools, police protection, health and welfare benefits, and the operation of the state government. In high property tax states like NJ, NY, CT, and CA being able to deduct SALT was a great benefit and the main reason why some taxpayers itemized on their tax return versus taking the standard deduction.

As part of the new tax law the federal SALT deduction is now capped at $10,000.  That means even if your property taxes on your residence are $25,000 you would only be allowed to take a deduction of $10,000 on your tax return.  And that’s not counting what you paid in state income taxes.

The high tax paying states aren’t sitting back idly and are trying to figure out a way around this new cap on SALT deductions.  They are going to try the Charitable giving route. There was no change to amount of your charitable giving you can deduct. You are still able to deduct the full, unlimited amount that you give to charity.  NJ passed a law that allows municipalities to set up “charitable funds” to accept the taxes that homeowners would have paid for property taxes. The municipalities would then use the money deposited into the “charitable fund” and fund the services that the property taxes would have been used for.  Problem solved. Taxpayers get the full deduction and the municipalities still get use of the money to fund the services they provide.

Not surprisingly the federal government says not so fast.  The U.S Treasury Department and Internal Revenue Service claim that they have the final say on whether contributions to charitable funds in lieu of property taxes will be fully deductible.  The IRS came out with an announcement that stated “Despite these state efforts to circumvent the new statutory limitation on state and local tax deductions, taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes.”  If the IRS disallows the New Jersey “charitable fun” move, it will likely wind up in the courts.

The saga continues….
Category: Taxes
Previous Post: « The Cost Of Not Choosing A Guardian For Your Children The Cost Of Not Choosing A Guardian For Your Children
Next Post: Budgeting In Retirement: Health Care Spending Projection »

Sidebar

Featured Articles

bautisfinancial risk number

Recent Posts

Summer 2022 Calendar - Investment Deadlines

Summer 2022 Key Planning and Investment Deadlines

June 28, 2022 By Bautis Financial

Millennials Retiring Early

Millennials Are Hopeful About Early Retirement – Daily Flash Briefing

June 28, 2022 By Bautis Financial

The S&P 500 Index

5 Facts About the S&P 500 Index

June 27, 2022 By Bautis Financial

Stock Market Weekly Recap

Market Recap Week of 6/20/2022 Through 6/24/2022 – Daily Flash Briefing

June 27, 2022 By Bautis Financial

Buying Your First Business

Episode 110 – Mistakes to Avoid When Buying Your First Business With Elliott Holland

June 23, 2022 By Bautis Financial

Blog Categories

  • Budgeting/Saving (29)
  • Business (49)
  • Clear A Path Podcast (6)
  • Client Resources (4)
  • College Planning Learning Center (2)
  • College Planning Podcast Series (3)
  • Daily Flash Briefing (1)
  • Education (23)
  • Estate Planning (13)
  • Finance News (448)
  • Insurance (21)
  • Investments (193)
  • Learning Center (23)
  • Lifestyle (49)
  • Miscellaneous (68)
  • Personal Finance (137)
  • Politics (19)
  • Real Estate (39)
  • Retirement Planning (89)
  • Social Security and Medicare (26)
  • Taxes (45)
  • The Agent of Wealth Podcast (110)
  • Uncategorized (126)
  • Videos (122)
  • Wealth Management (57)

Subscribe to Our Insights

Sign up to receive valuable financial insight and updates straight to your inbox each week.

Social

Follow along on social media

Contact

Bautis Financial
7 North Mountain Ave
Montclair, NJ 07042
Get directions
862-205-5800
Contact

Navigation

  • Schedule a Call
  • Podcasts
    • Agent of Wealth
    • Clear a Path
  • About
    • Our Approach
    • Our Team
    • Our Difference
  • Who We Work With
    • Individuals and Families
    • Small Business Owners
    • Retirees and Pre-Retirees
    • 401k Plan Sponsors
  • Insights
    • Blog
    • Business Valuation Advisor
    • College Planning Hub
    • Discover How
    • Learning Center
    • Risk Score
  • Client Access
    • Wealth Center
    • Orion

Copyright © 2022 · Bautis Financial · All Rights Reserved · Powered by Mai Theme

Return to top