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The $10,000 SALT Limit and the Rental Real Estate

The $10,000 SALT Limit and the Rental Real Estate

                Under the recently enacted Tax Cuts and Jobs Act, State And Local Tax (SALT) deductions are limited to $10,000.  How does this affect the individual taxpayer?

QUESTION:  Are SALT payments made on my rental real estate subject to the $10,000 cap?

ANSWER:  Generally, under the old law, all SALT payments were deductible.  However, the new law caps deductible SALT at an aggregate of $10,000 for individual taxpayers.

OF SALT, TAXES & MORTGAGES…

OF SALT, TAXES AND MORTGAGES…

Do you pay State and Local Taxes (SALT)? If you live in any of New York, California, New Jersey, Connecticut, or any other of the so-called high-tax states, you likely pay more than the national average in SALT.  Prior to 2018, you were allowed to itemize all of your SALT payments on your federal tax returns.  However, the recently passed law, the Tax Cuts and Jobs Act, curbs the deductibility and otherwise affects you disproportionately, compared with the rest of the country.   The changes to the deduction of State and Local Taxes (SALT) on federal tax returns are generally as follows

AN ANALYSIS OF THE TAX CUTS AND JOBS ACT

January 2018

 

AN ANALYSIS OF THE TAX CUTS AND JOBS ACT

On December 22, 2017, after much, well-publicized legislative skirmishes, President Donald Trump signed into law H.R. 1, otherwise known as the “Tax Cuts and Jobs Act.”   Provisions affecting individuals are generally effective beginning December 31, 2017 and expire on December 31, 2025.  Most business-related provisions are permanent and are effective beginning December 31, 2017.

This new law is, by all accounts, the most significant revisions to the U.S. tax code since 1986, affecting almost all individual and business taxpayers.   Our firm’s general assessment of the new law will therefore be a two-part series: this first part covers changes to individual taxpayers, and the second part will cover changes to business taxpayers.

Which State Has The Best Tax Climate?

The Tax Foundation is an independent tax policy nonprofit organization that has studied and researched tax policy since 1937. It reviewed the 2017 tax climates in each of the fifty states and ranked them overall based on five categories: corporate tax, individual income, sales tax, unemployment insurance tax, and property tax. In the near future, we will address the state tax climates of New York, New Jersey, and Connecticut.

The purpose of the Tax Foundation State Business Tax Climate Index is to enable business owners, policymakers, and taxpayers evaluate how their states’ tax systems compare to others. The Tax Foundation’s rankings are designed to show how well state tax systems are structured, rather than simply rank the states by the amount of taxes assessed.

The IRS Releases 2017 Inflation Adjustments

Now that we’re well into the New Year, taxpayers should know 2017’s inflation adjustments for several tax provisions set forth in Rev. Proc. 2016-55. These adjustments apply to tax years beginning in 2017 and transactions or events occurring during the 2017 calendar year. Many affect estate planners and expatriates.

*The 2017 taxable income thresholds on trusts and estates under § 1(e) are:

If Taxable Income is: The Tax is:
Not over $  2,550 15% of the taxable income
Over      $  2,550 but not over $ 6,000 $   382.50  plus 25% of excess over    $ 2,550

Tax Professionals Provide Input For IRS Future State

At the end of 2016, as part of a concerted, continuous effort to gather feedback from the tax community and partner groups, the Internal Revenue Service announced that tax professionals attending the Nationwide Tax Forums provided valuable guidance to Future State efforts to improve taxpayer service by highlighting a number of areas of concern.

The 2016 tax forums held by the IRS in five cities held during July, August and September were attended by more than 10,700 tax professionals. IRS Tax Forums are three-day events that are intended to provide tax professionals with the most current information on federal and state tax issues. This information is presented by experts from the IRS and partner organizations through training seminars and workshops.

New IRS Statistics Show A Concentration Of U.S. Income Among Only A Few

The U.S. has a progressive income tax system. Therefore, the rate of tax increases as taxable income increases. The purpose of imposing progressive taxes is to reduce the tax incidence of people with a lower ability to pay taxes, as these taxes shift increasingly to those with a higher ability-to-pay. Thus, the bulk of tax revenue is in high-income households.

Statistics just released by the IRS show that the top 1% of households received more than 20% of adjusted gross income in 2014 while paying almost 40% of income taxes. Less than 4% of income tax is paid by the bottom 50% of households. Federal tax rates in 2015 varied from 10% to 39.6%.

President Trump’s 2005 Tax Returns – What It Tells Us

President Trump’s 2005 Tax Return – What It Tells Us

Yesterday, Tuesday March 14, 2017, while most of the New England area was buried in snow, MSNBC published President Trump’s 2005 income tax return – or at least the first two pages of it.  What does the return tell us and what does it not?

The Basics – We know he had a positive income in the amount of $152,737,866 and $103,201,242 in tax write-offs.  He paid a total of $38,435,451 in taxes for the year.

Alec Baldwin Accused Of Avoiding New York Sales Tax On Painting Purchase

Donald Trump certainly has a few tax issues looming over him as he takes over the Oval Office. Alec Baldwin, known for his impersonation of Trump during the months leading up to the election, coincidentally also has an issue regarding the payment of taxes, specifically tax evasion.

In 2010, Baldwin purchased the Bleckner painting “Sea and Mirror” for $190,000. In September of 2016, Baldwin sued New York City art dealer Mary Boone alleging that Boone delivered a similar Bleckner work, but not “Sea and Mirror.” Baldwin alleges in his complaint that Boone promised to obtain the painting from an unnamed collector, but instead delivered a different piece of artwork, also painted by Bleckner. Baldwin is seeking damages measured by the difference between the purchase price of the painting Boone sold him and the current value of the original “Sea and Mirror.”

France Promises 1 Billion Euro Tax Cut In 2017

In September 2015, French President Francois Hollande promised households a 1 billion-euro ($1.1 billion) tax cut next year. Why such benevolence?  Hollande’s government was attempting to make up for the glut of gross domestic product (GDP) that was taken by his government in taxes in 2014.

Finance Minister Michel Sapin said “we’re doing it because it’s both fair and necessary.” Both France and Belgium collected the equivalent of 47.9 percent of gross domestic product in 2014. France’s finance ministry estimated that taxation and social charges have fallen from 44.9 percent of GDP in 2014 to 44.5 percent this year.

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