Living In A High-Tax State

As Americans, we all have to think about taxes. Almost everyone with an income has to file federal income

taxes, even if they don’t end up owing anything. So the people who live in states with no personal income tax (looking at you, Washington, Florida, Texas, and a few other places) may have to do a little less work come tax time, but they still have to do some work. Then there are the states that are considered to be more highly taxed. Those states have a high tax burden when you combine state and local taxes. A place might have high property taxes but no state income tax, or a high sales tax but low property taxes. There’s a lot to consider, but generally speaking, states on the East Coast like New York and Connecticut tend to have higher tax burdens, although California is also up there. If you live in one of those states, you’re probably paying special attention to the way the new tax law is implemented. So are your state leaders.

SALT deductions
One major sticking point in the tax bill that passed in late 2017 was what’s known as SALT deductions. SALT stands for State and Local Taxes, and the bill that eventually passed Congress and was signed into law limits those deductions to $10,000. That may sound like a lot, but in some areas of the country, it’s really not, especially if you live in a place where the housing market is soaring and you have a really expensive mortgage. A mortgage of a million dollars means you could cross that $10,000 mark without blinking.

Some state leaders feel like it’s not a coincidence that the states most punished by the new SALT deduction limits tend to vote for Democrats rather than Republicans. The tax bill was passed entirely with Republican votes; not a single Democrat supported it. New York, New Jersey, and Connecticut have announced plans to sue the federal government over the new tax bill, though it’s unclear if the suit will really get anywhere. State legislatures are also looking for laws they can pass to help alleviate some of the tax pain their residents may be feeling this year.

What happens next

The lawsuits will work their way through the courts system, but it’s probably best to count on the tax bill remaining on the books. If not, then you can deal with that later, but for now, it’s time to think about your strategy. If you’re in New York, it’s a good idea to look into hiring a New York tax attorney. Dealing with tax matters is literally their job, and if you’re confused about something, they can explain it to you. If you’re worried about a higher tax burden, a tax attorney may be able to help you look at other deductions you didn’t realize you qualified for. For instance, a lot of medical expenses can be deducted on your taxes. If, in 2017, you started using a CPAP machine to treat your sleep apnea, ask your tax attorney if that machine is deductible. It’s less likely that accessories like a CPAP cleaner will also be deductible, but it never hurts to ask. You can sit around and worry about the tax law’s effects on you, or you can start asking for expert help. The latter will give you a better plan and more peace of mind.