Treatment of State Income Tax & Property Tax in the New Tax Legislation
Current tax regulations allow individuals to deduct their state and local income taxes and property taxes (homeowners) if they can itemize their deductions. The new tax legislation, expected to pass this week, would cap the state & local income tax (referred to as SALT) and property tax to $10,000 for the 2018 tax year. This is expected to have an adverse impact on state residents that have high SALT and/or property taxes – CA, NY, NJ to name a few.
What to do? Consider prepaying your 2018 property taxes by Dec. 31, 2017 (postmarked). This will allow you to take the deduction in 2017 and mitigate the impact of the 2018 SALT & property tax cap of $10,000. It is a one-off strategy, but one to consider.