As taxpayers filed their returns for 2018 by the April 15 deadline or possibly later because of granted extensions, the first year of the federal 2017 Tax Cuts and Jobs Act is having a significant impact as some are paying more incomes taxes, especially in New York state with the loss of the State and Local Taxes deduction.
Considered the largest overhaul of the federal tax code since the Tax Reform Act of 1986, the TCJA makes small reductions to income tax rates for most individual tax brackets and substantially reduces the income tax rate for corporations.
In comparison, for 2017, taxpayers could claim a personal exemption of $4,050 each for themselves, their spouses and any dependents, as cited on the Smith & Howard website, an Atlanta-based certified public accountant firm. Taxpayers could either itemize deductions or take a standard deduction based on filing status: $6,350 for singles and married couples filing separately, $9,350 for head of household filers, and $12,700 for married couples filing jointly.
From 2018 to 2025, the TCJA suspends personal exemptions but roughly doubles the standard deduction amounts to $12,000 for singles and separate filers, $18,000 for heads of households, and $24,000 for joint filers. The standard deduction amounts will be adjusted for inflation beginning in 2019, Smith & Howard cited.
Deborah Kaminetzky, whose Cedarhurst law practice focuses on estate planning, matrimonial and small business, said that her advice to clients depends on the individual. “Some people are doing better, some people are doing worse, it depends on how much you are earning,” she said, adding that with “extraordinarily high” medical bills it might pay to itemize. “Overall, New Yorkers will do worse because of the loss of the property deduction,” she said, adding that the decrease in itemizing could lead to less contributions to charitable organizations.
Kaminetzky noted that a homeowner paying $9,200 in property taxes is not affected. “The idea is that in order to take advantage of the property tax deduction, you need to itemize, but you can only take $10,000 of it no matter how much property tax you actually have to pay, so if you are getting a $24,000 standard deduction, you need more than $14,000 in other deductions to make it worthwhile to itemize.”
Ocean Beach village resident Shoshanna McCollum said that her and husband John paid $2,500 in 2017 and this year it was a little over $4,000. “Taxes should not be left to do-it-yourselfers, let a professional do your taxes,” she said.
For some taxpayers, the increased standard deduction could compensate for the elimination of the exemptions, and possibly provide some additional tax savings. However, for those with many dependents or who itemize deductions, these changes might result in a higher tax bill — depending in part on how much they could benefit from the family tax credits.
Kaminetzky has one overarching piece of advice for all her clients. “I do tell people that if you have an issue you have to talk to your accountant,” she said.
State Sen. John Brooks, a Seaford Democrat, proposed granting military personal serving in combat zones exemptions of as much as $12,000 in property tax. The measure would provide for exemptions of as much as 15 percent of the assessed value of their residential property, not to exceed $12,000, according to the bill’s summary.
“These people have stepped up on their own to serve this nation,” he said. “It’s critical that we extend to the active-duty personnel the same benefits that we’ve provided to those who have served.” If approved it will take effect in January 2020.
Alexandra Dieckman and Timothy Denton contributed to this story.