Patrick Rumore - The NJ Homeowner’s Guide to Lower Taxes and Better Living

What SALT Actually Covers

SALT includes:

• Property taxes • State income taxes • Certain local taxes

If your total of these three categories stays under forty thousand dollars, you may be able to deduct the full amount on your federal return if you itemize.

But here is where the nuance comes in.

Scenario A: Taxes Are High, but Still Under the Cap

Let us say you pay:

• Thirty thousand in property taxes • Ten thousand in state income tax -Total: Forty thousand

Under the new rules, you can theoretically deduct all of it if you itemize and if your other deductions and credits fall into place.

Scenario B: Taxes Exceed the Cap

Now suppose you pay:

• Forty five thousand in property taxes • Fifteen thousand in state income tax -Total: Sixty thousand

You can still only deduct up to forty thousand. That means the remaining twenty thousand dollars in taxes provides no federal deduction benefit.