Long Lines at Tax Offices as Homeowners Try to Beat Hike [Blue State Blues, Media Hype]

NBC NEW YORK ^ | 12/27/17 | some whiney fake journalist

[TexasGator]

Wife said IRS ruled yesterday that you cannot deduct payments for non-assessed property taxes.

[Rusty0604]

When I was concerned about deductions, the mortgage interest alone for me was around 24K. And I was single. But I don’t have worry about it anymore, as I moved to Texas. :-)

[xkaydet65]

BINGO A WINNER. It is mind boggling that few people ever got this. I pay around the median of NY SALT, around 12,500. Because of my overall tax rate the IRS gets around 2,800 less than it should. And that only represents my property taxes. Multiply that over the entire state and the result is in billions never going to DC. The problem the progs have is that the money is either kept by or returned to the individual taxpayer, and not sent into state govt treasuries.

[Norseman]

I’m not certain, but I suspect that it’s really because the blue states have a lot more residents with exceptionally high incomes.

The SALT deduction actually keeps their federal tax contribution down because it lowers their federal taxable income.

[Norseman]

Yes, I was wondering about that. I mail mine in. Why stand in line?

[Norseman]

>>IRS has already ruled that if they were not assessed in 2017, they cannot be paid in advance for 2018.<<

That makes sense, or people would be prepaying 2019, 2020, etc., also.

But I don’t think that’s what’s going on here. I suspect people who normally would pay their 2017 taxes in 2018 (and paid their 2016 taxes in 2017) are doubling down and paying their 2017 taxes this year to get the deduction. I don’t see why the IRS would stop that, since many people routinely pay their taxes at the very end of the year.

When my deductions dropped due to lower mortgage interest, for example, I was paying one year’s property tax in the following year and then paying the next year’s tax in the same year, getting two property tax payments made in the same year. That put me over the standard deduction, barely. I look forward to the simplification presented by the $24,000 standard deduction and the limits on deductible taxes. Now I can quit worrying about gaming the tax system.

[robroys woman]

The SALT deduction actually keeps their federal tax contribution down because it lowers their federal taxable income.

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And by reducing their Federal tax burden, it keeps the money in the state.

But not any more. :)

When you make an activity tax deductible, you get more of it. Conversely, when you remove the deduction, you get less of the activity. You will be seeing tax revolts in states where the tax payers are adversely affected by this.

[Norseman]

>> It is mind boggling that few people ever got this. I pay around the median of NY SALT, around $12,500. <<

Given that you live in NY, or at least pay your taxes there, have you seen any discussion as to what this tax law will do to your state income tax?

I could be wrong, but I suspect that most states that collect an income tax base their calculation on the federal taxable income reported to the IRS. They might adjust it some, but I think they’d start with that figure.

Well, in the most states, and the blue states in particular, dropping the SALT deduction will result in federal taxable income being higher, sometimes considerably higher. So if a state is taxing the last dollar at, say, 10%, it will collect 10% of every dollar increase in federal taxable income from it’s high earners. And in most cases, if one changes from itemizing deductions, to using the standard deduction, federal taxable income will rise. If so, state tax collections will also rise.

Ironically, this tax bill not only cuts taxes at the federal level but it raises tax collections at the state level, particularly in the blue states, unless the individual states take action to stop that from happening.

Assuming I’m right in describing the above, it will be interesting to see how blue and red states react. If you live in a red state, maybe contact your legislators and tell them it’s a good time to cut the rates? We know what will happen in most blue states; they’ll take the money, thank you.

[Norseman]

Probably true. And see my post #28 where I discuss how state tax collections will probably go even higher as a result of the federal tax changes. That could trigger the process you’re talking about.

By the way, the reduction of the impact of the property tax and mortgage interest deductions should both work to depress housing prices below what they would otherwise be. As you said, if you remove the deduction you get less of it.

[robroys woman]

By the way, the reduction of the impact of the property tax and mortgage interest deductions should both work to depress housing prices below what they would otherwise be.

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I see that as a positive result of this. My daughter and her husband just moved from Studio City, CA to a suburb of Phoenix. The income level is the same (they are both accountants), but an old 3 bedroom bungalow in the area they lived, even on a busy road and small lot, couldn’t be had for less than $650,000.

They just bought a beautiful, LARGE three bedroom home WITH a nice in-ground pool in their new location in Arizona for $260. No traffic hassles, awesome mountain biking (they are into that) and low taxes.

I would love to see home prices come down.