We at Deductions.TAX are politically neutral. We don’t take a position because our job is to help you understand your taxes and take advantage of what’s in front of you, not support a political view. We would be remiss however, if we did not point out trends and interesting observations. The first is the demographic that gets hit hardest by the tax changes.
If you look at it a certain way the answer is… Democrats. Here is why. The two largest blue states in the union are California and New York. They both also happen to be in the “top five” in terms of population (California is #1 and sits at almost 40 million, New York is #4, and sits at almost 20 million). Finally, California and New York both sit in the top 10 in terms of taxes – California’s tax burden is 11% and New York’s is the highest in the country at 12.7%…
One of the biggest changes in the tax law is a limitation on the deductibility of state and local income and property taxes. Yes, you can deduct them, but you are limited to a combined $10,000. So, if you are a mid to high earner, then your deduction will end up capping out in these high taxing states very quickly.
Was this a Democrat tax penalty?
We’ve seen a lot of political infighting between the Democrats and the Republicans in the last 12 months, but despite what some of our competing sites say, we don’t believe this change in tax law is representative of one of them. The reason is that this limitation affects all states, not just the most populous ones. It’s true that several of those states just happen to be heavily populated by Democrats, but there are others that are largely Republican.
How do you play this?
You either move to a different (lower taxed) state, into a lower taxed (usually smaller) home, or petition to try to get your taxes reduced (good luck with the last one). In all cases, remember the magic number. $10,000. That is the maximum amount of personal income you can deduct on your Federal return for state and local income and property taxes in 2018 and beyond.
Good luck out there…