Who should be concerned with the SALT deduction?



Who should or shouldn’t be using the SALT deduction? Here is Dr Bart with his “bit” to answer this question

“And let's talk about what we call it, SALT deduction. Remember, this is just $10,000. It's so important that we had to put one or two slides in to make sure you are aware of it. Look at the second sentence. The new tax law, this is the law that was passed in 2017 effective 2018 and 2019. That's that $10,000 cap on state and local taxes including property taxes, real estate taxes and it only applies to individuals who want to take an itemized deduction. And I've got another slide here. I'm talking to you about this and I want you to realize this. Because I mentioned to you earlier when I was showing you schedule A that there's some expenses that can be put on line six that the 10,000 doesn't apply to.

Take a look briefly at slide number eight and you're going to see exactly what I'm talking about and that is, and read it slowly, the $10,000 limit does not apply. I should have put not in large bold print so there's no misunderstanding. Foreign income, war profits, excess profits tax. And on the second bullet point, state and local foreign real estate, foreign investments, state and local personal property taxes, if those taxes are paid or accrued in carrying out a trade or business or in an activity engaged in for production of income. This is not a schedule C, this is if your client wants to itemize on schedule A. This goes on line six below the calculation of the $10,000. Very important for you to understand that. I want you to know that and don't forget it. This comes up constantly. You might say, "Well Bart, it's not even worth the hassle. We're simply going to take the standard deduction." Different story.

Let's talk a little bit about home ... By the way, you know what? Before I get to home improvements let me mention something to you. States and counties impose local benefit taxes for improvements of property, assessments for streets, sidewalks, sewer lines. You can't deduct these as taxes. So what am I going to do if I can't deduct them? Help your client because some day they may sell the house. What can't be deducted? These special assessments on the real estate tax bill can be added to the cost of the house which will lower the profit reported when that property is sold especially rental property.”