I heard someone on the Radio today say that you can currently Deduct the State Taxes you pay from your Federal Taxes.
Of course that is a falsehood.
You can only Deduct the State Taxes you pay from the Reportable Income to the Federal Government, not from the actual Taxes paid to the Federal Government.
Example, if you pay $1,000 in State Taxes, your reportable Income is lowered by $1,000. In a 15% Tax Bracket, you pay $150 more in Federal Taxes under the new GOP Tax Plan, not $1.000 more.
The bigger issue (to me) is the Elimination of the Personal Exemption which is combined with the Standard Deduction under the GOP Tax Plan. (I’m also not sure if the Personal Exemption stays if you Itemize like it does today).
It applies only to the Single or Joint Filers, but if they have Children they lose the current $4,600 per Child Exemption and gain maybe $2,000 with the increased Child Credit.
I think the Standard Deduction should be $12,000 for each Tax Filer and $6,000 for each Dependent Child under 18.
Then a Family of four pays no Federal Income Taxes on Income below $36,000.
I think that would help mitigate the effects of eliminating the Deduction of State Income Taxes.
The Home Mortgage Interest and Charitable Donations Deductions are the Third Rail IMHO. They ain’t going away.
The $4,600 child exemption @ 25% marginal rate is $1,150 in taxes, so they’d come out $850 ahead if your $2k extra credit is correct.