Did you know taxes that you pay to a state or county may be deductible for your federal income tax? The “State and Local Tax Deduction”, commonly known as the SALT Deduction, is an itemized deduction that taxpayers may claim when filing their income tax.
A Tax Towards a Tax
Each state has its own set of tax regulations and accompanying agencies to collect those taxes. For example, the California Franchise Tax Board (FTB) collects income tax from California residents. The income tax paid to the FTB can be claimed for the SALT deduction. Property taxes may also be claimed towards the SALT deduction.
Itemized Deduction
Just like other itemized deductions like medical expense and charitable deductions, the SALT deduction is tallied up into your total itemized deductions. Your total itemized deductions must exceed your standard deduction in order to be able to see the benefits of itemizing your deductions. Check out our article on itemized deductions for more information.
Push it to the Limit
Prior to the Tax Cuts & Jobs Act (TCJA) of 2017, there was no limit on how much state & local taxes could be claimed as an itemized deduction. TCJA implemented limits to the SALT deduction to $10,000 (Married, filing jointly). While the long term results of it remain to be seen, many tax professionals and cable news pundits have weighed in on the SALT limit of $10,000, how it affects taxpayers, and its benefits/disadvantages.
The SALT deduction is one of several itemized deductions available to taxpayers. With some planning and strategy, individuals can utilize itemized deductions to reduce their taxes. MiklosCPA has helped numerous individual and small business clients with their tax needs such as itemizing their deductions. We support our clients, wherever they may be in the world at the time, through our virtual office services and regular feedback. Give us a call and learn more how we can help you and your small business take off! Also follow our social media for articles like this one and other interesting tidbits in tax.