Displaying items by tag: deductions

(Miami)

It seems like wealthy people everywhere are talking about picking up and moving to Florida to get away from the lack of SALT deductions in so many states. However, UBS financial advisors say it isn’t as easy as it is made to sound. Firstly, there are significant residency rules—it is not as if you can just buy a place in Florida and make it your tax home without really leaving your high tax state. And secondly, even for those who do actually want to move, the issue is that the wealthy suburban home market is very soft at the moment, and these residents are having a hard time selling their primary home, which means they are stuck.

FINSUM: Moving is not nearly as simple as the idea of “retiring in Florida” sounds. We do think this will cause a migration, but it will not be a flood.

(New York)

At the end of August, the IRS closed the door on the numerous high-tax states that were trying to classify their residents’ taxes as charitable gifts so as to make them deductible. That moved slammed the door of options shut for New York and New Jersey residents. However, the IRS didn’t close the door to other workarounds, and Connecticut apparently has a favorable model that specifically applies to pass-through entities. The workaround allows full deduction to the previous tax level for users through an income credit system on taxes paid.

FINSUM: One wonders if the IRS will just move on to shutting these programs down or whether this is a model that other states can build on.

(Washington)

One of the weakest and most questionable aspects of the recent tax package was the federal government’s new policy to limit state and local tax deductions (referred to as SALT). The change is rules meant that total tax bills for residents of higher tax states were set to soar. Unsurprisingly, these states, including huge payers New York and California, are devising work arounds, such as making state taxes a donation, which makes them fully deductible. Or they could eliminate income taxes and boost payroll taxes. If states adopt such tactics, it will leave a gaping estimated $154 bn hole in the US Treasury’s budget over the next eight years.

FINSUM: This was a big unforeseen consequence of the tax policy that could have a major impact on the budget. Congress is probably going to have figure something out.