State And Local Tax Deduction, Salt, For 2019, 2020 Returns 1

Income Insights: Understanding the SALT Deduction

While the House GOP and Trump-backed tax package does have important stipulations for rental property owners, including the return of 100% bonus depreciation, the SALT cap remains largely a non-issue for landlords. Because it is in lieu of your having to add all of your general sales tax payments from your receipts, which you are always entitled to do. This doesn’t guarantee that the limit will disappear, but it does mean that the SALT deduction limit may change.

What is the SALT Deduction?

SALT can also be beneficial for high-income taxpayers who have made large purchases with sales tax, or have paid high income tax and want to claim one of those back. To qualify for the SALT deduction, taxpayers must have paid state and local taxes during the tax year. These taxes must be paid on or before the due date of the tax return, including any extensions. Additionally, taxpayers can deduct taxes paid on prior year state and local taxes, provided they were paid during the current tax year.

You pay the higher rate only on the part that’s in the new tax bracket. If the gift of property is $250 or more, you must also have a contemporaneous written acknowledgment from the charity. Form 8283 doesn’t satisfy the contemporaneous written acknowledgment requirement, and a contemporaneous written acknowledgment isn’t a substitute for the other records you may need to keep if you gave property. If you gave used items, such as clothing or furniture, deduct their fair market value at the time you gave them. Fair market value is what a willing buyer would pay a willing seller when neither has to buy or sell and both are aware of the conditions of the sale. For more details on determining the value of donated property, see Pub.

If your Form 1098 shows any refund of overpaid interest, don’t reduce your deduction by the refund. If the total amount of all mortgages is more than the fair market value of the home, see Pub. You can only deduct home mortgage interest to the extent that the loan proceeds from your home mortgage are used to buy, build, or substantially improve the home securing the loan (“qualifying debt”). Make sure to check the box on line 8 if you had one or more home mortgages in 2024 with an outstanding balance and you didn’t use all of the loan proceeds to buy, build, or substantially improve the home. The only exception to this limit is for loans taken out on or before October 13, 1987; the loan proceeds for these loans are treated as having been used to buy, build, or substantially improve the home. If you checked the “Yes” box on line 6 of any of those worksheets, multiply line 5 of that worksheet by the amount that you entered on line 1 for that state on the first worksheet.

If you lived in the same state for all of 2024, enter the applicable amount, based on your 2024 income and family size, from the 2024 Optional State Sales Tax Table for your state. State And Local Tax Deduction, Salt, For 2019, 2020 Returns Read down the “At least–But less than” columns for your state and find the line that includes your 2024 income. You may have a medical or dental insurance policy that also covers an individual who isn’t your dependent (for example, a nondependent child under age 27). You can’t deduct any premiums attributable to this individual, unless this individual is a person described under Whose medical and dental expenses can you include, earlier.

Optional Sales Tax Tables

According to IRS data, residents of Manhattan, took the highest average deduction in the US. Unless further congressional action is taken, the cap returns permanently to $10,000 in 2029. Don’t enter a net qualified disaster loss from Form 4684, line 15, on line 15. See Line 16, later, for information about reporting a net qualified disaster loss. 526 to figure the amount of your deduction if any of the following applies.

Investment Interest

• Members who hold more than 50% of the passthrough entity’s ownership interests must consent to the election.
• If you own a residence that you rent—whether it’s a short-term vacation rental or a long-term rental with a lease—you can deduct the full amount of property taxes you pay on each rental property, regardless of how high they are.
• Only enter on line 11 the deductible value of gifts you made in cash or by check.
• You can also deduct home mortgage interest paid on the federal level.
• If you are filing a paper return, explain the difference by attaching a statement to your paper return and printing “See attached” to the right of line 8a.

Among the most significant changes, the new act temporarily increases the cap on the state and local taxes, or SALT, deduction—a move that could make itemizing worth a second look, particularly if you live in a high-tax state. Legislative momentum around the SALT cap reflects the balance between tax equity and revenue needs. Several proposals suggest increasing the cap to $20,000 or eliminating it for certain taxpayers, which would particularly benefit you if you live in states with higher taxes.

Sales Taxes

If your insurance company paid the provider directly for part of your expenses, and you paid only the amount that remained, include on line 1 only the amount you paid. If you received a reimbursement in 2024 for medical or dental expenses you paid in 2024, reduce your 2024 expenses by this amount. If you received a reimbursement in 2024 for prior year medical or dental expenses, don’t reduce your 2024 expenses by this amount. However, if you deducted the expenses in the earlier year and the deduction reduced your tax, you must include the reimbursement in income onSchedule 1 (Form 1040), line 8z. If you and your spouse paid expenses jointly and are filing separate returns for 2024, see Pub. 504 to figure the portion of joint expenses that you can claim as itemized deductions.

What Is the SALT Write-Off?

State and local taxes subject to this limit are the taxes that you include on lines 5a, 5b, and 5c. The new law also introduces a phaseout for higher-income taxpayers. For filers with MAGI above $500,000 ($250,000 for separate filers), the SALT deduction is reduced by 30% of the amount exceeding that threshold.

Prospects for SALT Cap Repeal

• She supports small businesses in growing to their first six figures and beyond.
• Points paid for other purposes, such as for a lender’s services, aren’t deductible.
• FreshBooks accounting software makes it easy to keep track of your income and expenditures so you can make the most of the SALT deduction.

If the exception applies, your loan may be treated in the same manner as a loan taken out on or before December 15, 2017; see Pub. If you checked the “Yes” box and your local general sales tax rate changed during 2024, figure the rate to enter on line 3 as follows. Multiply each tax rate for the period it was in effect by a fraction. The numerator of the fraction is the number of days the rate was in effect during 2024 and the denominator is the total number of days in the year (366). You lived in Locality 1 from January 1 through August 31, 2024 (244 days), and in Locality 2 from September 1 through December 31, 2024 (122 days). Note that this amount may not equal your local sales tax deduction, which is figured on line 6 of the worksheet.

Based on your tax situation, we will determine what is most tax advantageous to you and whether you should itemize or use the standard deduction. Some taxes assessed by state or municipal governments pay for special benefits for a particular district. Maybe they pay for new sewers for one neighborhood or better sidewalks for a specific area. Because these taxes and benefits don’t affect the entire tax base, they aren’t deductible. And if you had to make any payments on prior-year state or local taxes, you can deduct those, too.

Why this matters for landlords and short-term rental owners

However, carryover amounts from contributions made in 2020 or 2021 are subject to a 60% limitation if you deduct those amounts in 2024. After applying those limits, enter the amount of your carryover that you are allowed to deduct this year. If you deduct more than $500 for a contribution of a motor vehicle, boat, or airplane, you must also attach a statement from the charitable organization to your paper return. The organization may use Form 1098-C to provide the required information. If your total deduction is over $5,000 ($500 for certain contributions of clothing and household items (discussed next)), you may also have to get appraisals of the values of the donated property.

You can also deduct home mortgage interest paid on the federal level. Pamela de la Fuente leads NerdWallet’s consumer credit and debt team. Her team covers credit scores, credit reports, identity protection and ways to avoid, manage and eliminate debt. You paid $70 to a charitable organization to attend a fund-raising dinner and the value of the dinner was $40.