The legislation would help residents avoid double taxation.
If you live in New Jersey’s 7th district, chances are you could save over $3,000 next year on your taxes if a bill that recently passed the House becomes law.
One part of the 2017 tax law from President Donald Trump essentially raised taxes for many in Hunterdon County, and the parts of Essex, Morris, Somerset, Union, and Warren counties that help make up the 7th district. Under prior law, Garden State taxpayers could itemize state and local tax, or “SALT,” deductions with no cap. But Trump’s signature legislation capped the amount you can deduct, meaning millions of Americans are being double taxed.
Democrats like Rep. Tom Malinowski see fixing this as a top priority. Speaking before the House Ways and Means Committee to demand the State and Local Tax deduction be fully restored, Malinowski said the SALT deduction changes have unfairly punished his constituents.
“Over the past few months I have held a roundtable on SALT in every county in my district,” Malinowski said. “In Westfield, New Jersey, where the average property tax is over $15,000, I met an 82-year-old man who owed $4,000 more in federal taxes this year. For someone on a fixed income, that is devastating.”
He added that because the SALT cap means fewer people will itemize deductions, there will be less of an incentive to give to charity.
But just how much does the SALT change hurt taxpayers in New Jersey’s 7th? Courier built a model to find out. First, we looked at Census data on mean income in the district to determine an average tax rate of 20% to 25% for this deduction. Then using data from the Tax Policy Center on the average SALT deduction in 2016, we calculated that, on average, taxpayers who claim a larger SALT deduction could save between $3,267.93 and $4,084.91 per year on their tax bill.
With that money, you could cover about one-third of in-state tuition at Rutgers University for the kids. Or you could head to Atlantic City, put it all on black, and maybe walk away with double your bet!
Jeff Katz, an estate and tax law attorney, said most of his clients were hit by the cap on SALT deductions, some to the tune of several thousand dollars. And, “as they’ve started to see a bigger and bigger bite” taken out of their tax returns, they’re beginning to realize how the myriad of new tax rules including the changes to SALT deductions have actually impacted them.
Property-owners with incomes between $100,000 and $200,000 who live in high tax states, like New Jersey, have taken the biggest hit as a result of the SALT cap, he said.