New York State Offers Itemized Deduction Relief for Residents
One of the most talked about changes resulting from last year’s passage of the Tax Cut and Jobs Act (TCJA) is the limitation or elimination of most itemized deductions, effective for years beginning in 2018. For those individuals residing in high taxed states, such as New York, New Jersey, California, Maryland, and Connecticut for example, the limitation of state and local tax (SALT) deductions to $10,000 per year will be especially painful. This law change will result in many taxpayers being unable to fully deduct state income, property, sales, and real estate taxes as they had in years past.
As of this writing, many states have not yet addressed how they will handle the federal itemized deduction changes for their residents. During 2018, the New York State 2018-2019 Budget Bill was passed and many of these issues were addressed. Relating to the limitation of the $10,000 SALT deduction, there is some relief for New York residents with Adjusted Gross Income (AGI) below $1 million. New York State residents will be eligible to reduce their income by itemized deductions on their New York State income tax returns, even if the standard deduction is used on the federal return. The New York itemized deductions will be calculated using the rules in place prior to the enactment of TCJA. Therefore, most individuals will be able to fully deduct real estate or other non-income type taxes, even if cumulatively they exceed $10,000, on their New York State return. As a result of these New York State provisions, state residents may want to consider pre-paying real estate taxes prior to December 31, 2018 so as to avail themselves of an additional deduction on the 2018 New York State income tax return.
For those residing outside of New York State, or if you wish to discuss your individual tax situation and how the changes in the new tax laws impact you, reach out to your Marcum Tax Professional.