SALT a critical issue in potential tax reform
As Congress prepares to review a potential change in the tax code, Massachusetts residents have many issues to be watching.
Residents in Massachusetts may well be aware that the current presidential administration has announced plans to reform income taxes. This may be no easy feat as there are many issues that republican and democratic lawmakers must come to some agreement on along the way. Individual taxpayers will want to be watching this debate closely as the changes may have dramatic impacts on them and their tax liabilities.
State and local income tax deduction in question
Currently, people who live in states where there is a state income tax are able to deduct payments to their states for these taxes from their federal tax return. The Balance indicates that in Massachusetts the state income tax is 5.2 percent. While this is lower than many states such as New York which has a rate of 8.82 percent or California which has a rate of 13.3 percent, it is not insignificant. Being able to deduct this tax from a federal return saves taxpayers money .
One of the proposals in the new tax bill is to eliminate this deduction. According to The Hill, many people including the Governors of New York and California have launched a vocal protest to this part of the tax plan. They have actually gone so far as to allege that such a move is a means of punishing states that did not vote for the current President in last year’s election.
Property tax deduction also in jeopardy
Another tax deduction that many Americans take advantage of is the ability to deduct property taxes from their federal income tax. Bloomberg Politics reports that while the original plan included provisions to repeal this deduction, lawmakers have announced that they will allow it to be preserved.
The possibility of losing this deduction was opposed by many groups including the National Association of Realtors and the National Association of Home Builders.
Republicans in need of compromise and a deal
Politico explains that the first year of the current administration’s lack of ability to gain consensus on major legislation puts an extra burden on lawmakers to get a tax bill passed. Some suggest that there are signs republicans are willing to compromise to ensure that they get something rather than nothing passed. Potential areas for these compromises include tax cuts on the highest earners, increases in the standard deduction and expanded credits for children.
Changes require careful watch
As legislators work together on potential tax reform, consumers in Massachusetts should take the opportunity to talk with an attorney about how their tax situation may be impacted by the outcomes.