Limiting State And Local Tax Deductions

Yes, it is a big f**king deal.

We accelerated our property tax payment to get it in this year, before the limit hits next year. This will cost us, but I hope it has the effect of finally reining in the tax-hungry politicians in Sacramento. It might even make it a useful campaign issue to get a few more Republicans into the legislature.

[Wednesday-morning update]

States trying to come up with new schemes to get around the limits.

Anything except actually reducing spending.

20 thoughts on “Limiting State And Local Tax Deductions”

  1. I read something to the effect that prepaying may not do anything if you don’t have a 2017 appraisal. I may have the details of that wrong, since I don’t own a house and thus it doesn’t apply to me, but you might want to look into it.

    1. California property taxes are assessed in for an entire year in November of each year, with the option to to split it into two payments, with the second payment due the following April. So California homeowners have had their entire yearly property tax bill assessed since November, and will face no problems with having paid the whole thing prior to the end of 2017.

      1. Are 2017 assessment in Texas was made in May. Taxes are due by end of Jan 2018. So like Rand, we paid ours before Jan. 1. Usually the notion is to not give the government any money until absolutely necessary, but this seemed like a good exception (not the my household actually follows the notion anyway).

        Still, you can’t guess on your 2018 taxes and pay them early, according to the IRS. I head read Rick’s link about a week ago.

  2. I saw some talk that the tax changes were illegal, because they unfairly targeted high tax ‘blue’ states.

    Um, doesn’t that mean the previous state of affairs was illegal, because it unfairly targeted LOW tax ‘red’ states?

  3. Umm under the prior system the blue and Red state taxpayer paid approximately the same it was just the blue states politicians got to decide how there tax money was spent where the red states taxpayers money went to the feds instead but then the red states got fed money back to support their underfunded state services that was collected from blue states by percentage. Now the old system more adversely effect the low middle class/Standard Deduction people, vs wealthy/upper middle class, people who can spend hours doing taxes or have accountants.
    Though this was a fairly effective way of taxing those states that didn’t vote for trump other than maybe Florida dunno how that washes out with there no income tax but high real estate tax.

    In the end do you want to encourage the states to tax and fund there services on their own?. Or want the Feds to primarily tax and distribute the money as they see fit. Of the opinion that concentrating so much money and power in Washington is a bad thing. Seeing how the 202 and surrounding area has had the highest growth in wealth with no real industrial output in the last 20 years. Distributing it around the states and having the feds cracking down on state corruptions doesn’t seem so bad. Now counter point would be California where their high tax and spent foolishly that they need feds to bail them out down the road when their turkeys of high speed rail comes to roost.

  4. @Paul D.: “… the tax changes were illegal, because they unfairly targeted high tax ‘blue’ states.”

    Considering that this passed both houses of Congress and was signed by the President, I would love to see the legal theory for the tax cuts to be declared illegal.

    And also for the legal theory that certain Germans are using to make a similar claim (or so I’ve heard).

    1. I’m with you, and primarily because I think the only argument is based on inequality. If inequality is the legal theory, then the best solution is a simplified tax code without all the discriminating loopholes. The postcard tax return. Alas, I think the reality is what Fenster suggests.

  5. This is an interesting situation. No one wants to pay more in taxes, despite what some claim, but there are a lot of Republicans in blues states that might see their taxes go up because of this. Anecdotally, many seem to be fine with this.

  6. I’m a libertarian in a CA. It’s going to hurt, but it’s a good hurt. The faster we get to the point where the typical voter in CA says “enough!” the better. Tear off the bandaid.

  7. Silicon Valley is presently in a real estate bubble which makes 2008 look like child’s play. Houses that would sell for 50k in Wyoming are selling for well over a million bucks there. That’s 10k in property taxes from day one – so no deduction whatsoever for the mortgage payment meaning 50k+/year in additional taxable income for the least able to pay.

  8. I live in a state w/o a state income tax but makes up for that via local funding using a high property tax rate. However, our assessments don’t come out until May and October, with billings going out in the following months. So w/o an assessment there is nothing to pre-pay.

    Fail….

    1. That doesn’t make sense. If you have an assessment, then you know what to pay. Whether it is due in 2017 or not, as suggested by an invoice or bill, is irrelevant. You can pay early, and the IRS website even states this. You only need the assessment by 2017. Alas, it is irrelevant, as your comment was made in 2018.

  9. Reminds me of one of the lefty-est people I know complaining about having to pay their taxes early to avoid paying more.

    But, you know, when other people want lower taxes, it’s just greed and not paying their share or anything, right?

    (Because “they’re rich”, you know.)

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