The New Federal Tax Plan and Your Property Taxes: Navigating the New Deduction Scheme
In December 2017, the United States Congress enacted a new federal tax bill that affects not only how and at what rate Americans are taxed, but also how Americans can take itemized deductions. New legislation limits the amount of itemized deductions for state and local individual income, sales, and property taxes to $10,000 annually (whereas previously property taxes were entirely deductible). So how does this affect your bottom line?
New Hampshire Property Taxpayers
For New Hampshire taxpayers with an annual property tax burden of less than $10,000 per year, the new legislation will not significantly affect your itemized deductions. Why? Because the Granite State does not impose an individual state income tax or general sales tax, allowing property taxpayers to allocate the entire $10,000 deduction amount to property taxes.
However, New Hampshire residents with an annual property tax burden of $10,000 or more will no longer be able to "write off" the entirety of their property taxes from their federal taxes, and will be capped to the $10,000 max. The effect? These residents will likely pay more in federal taxes.
Residents in Other States
Residents in states with individual income and sales taxes in addition to property tax- like Connecticut and Massachusetts- will certainly feel financial pressure as a result of the new $10,000 deduction cap. A lower deduction amount correlates to a higher taxable amount- meaning residents in states where annual property, state income/ sales tax exceeds $10,000 will pay more federal taxes on an annual basis.
What Can I Do- NOW?
If you are a taxpayer currently deducting more than $10,000 per year in itemized property tax, state income tax, and/or state sales tax, you will feel the effects of the new legislation. However, you can still act to mitigate the effects on your finances.
Pay Your Property Taxes By the End of 2017
The new deductions take effect on January 1, 2018- meaning that if you pay your property taxes on or before December 31, 2017 you can still take advantage of the unlimited property tax deduction for your 2017 federal taxes. Many assessing offices are operational in the last week of December, and may accept payment in person and online.
Consider Long-Term Strategies
Laws change all the time, but that doesn't mean you can't undertake long term strategic planning to mitigate your tax burden. The professionals at Allobar Strategies can help develop long term strategies to mitigate annual tax burdens for property taxpayers throughout the United States, in conjunction with federal and state taxation attorneys and experts. Contact us today to begin your tax planning strategy.