Monday, February 4, 2019

Some useful information regarding salt and mortgage interest deduction

1. What is the SALT deduction and how does it affect buyers?
The acronym stands for State and Local Tax. The ‘SALT’ deduction allows taxpayers who itemize deductions on their federal income tax to deduct certain taxes paid to state and local governments, such as property taxes, from their gross income. The new tax plan instituted a cap on this deduction, whereas previously there was no limit. As of the 2018 tax year, the maximum SALT deduction is $10,000 , or  $5,000 in the case of a married individual filing a separate return.
The new cap could leave taxpayers who itemize their deductions, typically high-income filers, with a higher tax bill. However, the loss in deductions could be offset by the decrease of the federal income tax rate, the doubling of the estate tax deduction, and the cutting down of the capital gains rate. Additionally, some state governments, including New York, are working to implement strategies to offset the effects of the cap on the SALT deduction.

2. What is the interest on mortgage deduction?
            The interest on mortgage deduction allows taxpayers who itemize their deductions to deduct their mortgage interest from their taxable income when filing tax returns.
The new tax plan decreased the amount that a taxpayer can deduct. As of the 2018 tax year, the mortgage interest on total principal of as much as $750,000 in qualified residence loans can be deducted, down from the previous principal limit of $1,000,000. For married taxpayers filing a separate return, the new principal limit is $375,000, down from $500,000. For the purposes of the mortgage interest deduction, a "qualified residence" means the taxpayer's primary residence or second home, not an investment property. Additionally, the loan amount for which interest is deducted cannot exceed the cost of the home.

Barry Weidenbaum, Esq.
155 East 44th Street, 19th Floor, New York, NY 10017
Tel: (212) 832-7400 x 4130  
|  Fax: (212) 832-7761

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