Anybody else get a huge tax increase due to SALT deduction changes?

[JustSomeGuy155]

Did anybody else here get a huge tax increase as a result of the cap on the SALT deduction?

I knew the tax law changes were going to hit high-earners in high-tax states but I hadn't seen too many threads/complaints around tax-time on this board, so I figured it wouldn't be too bad. Rude surprise, my tax rate increased by 4% and I am writing a mid 5-figure check to the IRS due to underwitholding

I don't have any other significant deductions to take, so I'm taking the standard deduction of $12k. Last year, I was able to deduct over $80k in itemized deductions due to SALT as well as some charitable contributions. The result this year is my effective federal tax rate went from 26% to 30%. This is from W2 income in the 37% marginal bracket. My investment portfolio is pretty tax efficient and does not contribute much to the tax burden.

I realize how lucky I am to have this problem, but it still hurts to write the five-figure check. I think it'll be the biggest check I've ever written! Anyone else thinking about how to reduce taxes for next year? Do you have any suggestions for me?

EDIT: Thanks to all the responses, I think I understand why I had a "perfect storm" while most were not very negatively affected. See here for the summary

[Eric76]

Move to Florida.

[cookymonster]

As above. Vote with your feet.

[whodidntante]

It's been discussed here a few times. Yes, some Bogleheads saw a tax increase after the TCJA was enacted.

[curiouskitty]

Yep the tax rate on my second job was so high due to phase outs that I should have just not done it and saved the time

[sf_tech_saver]

I got lucky and had the SALT swap out during a year with a windfall in CA. Cost: $700k in CA taxes I suddenly can't write off. Additional check writing at tax time ~$300k. Just sending in the last $75k of that tonight.

Cheers

[whodidntante]

I got lucky and had the SALT swap out during a year with a windfall in CA. Cost: $700k in CA taxes I suddenly can't write off. Additional check writing at tax time ~$300k. Just sending in the last $75k of that tonight.

Cheers

Sounds terrible.

[JustSomeGuy155]

Move to Florida.

It's an idea, but my income could decrease more than my tax bill. I'd also have to check with all the important people in my life who don't live in Florida

[SC Anteater]

Did anybody else here get a huge tax increase as a result of the cap on the SALT deduction?

I knew the tax law changes were going to hit high-earners in high-tax states but I hadn't seen too many threads/complaints around tax-time on this board, so I figured it wouldn't be too bad. Rude surprise, my tax rate increased by 4% and I am writing a mid 5-figure check to the IRS due to underwitholding

I don't have any other significant deductions to take, so I'm taking the standard deduction of $12k. Last year, I was able to deduct over $80k in itemized deductions due to SALT as well as some charitable contributions. The result this year is my effective federal tax rate went from 26% to 30%. This is from W2 income in the 37% marginal bracket. My investment portfolio is pretty tax efficient and does not contribute much to the tax burden.

I realize how lucky I am to have this problem, but it still hurts to write the five-figure check. I think it'll be the biggest check I've ever written! Anyone else thinking about how to reduce taxes for next year? Do you have any suggestions for me?

$3K higher income in 2018, $4K more in taxes.

[JustSomeGuy155]

I got lucky and had the SALT swap out during a year with a windfall in CA. Cost: $700k in CA taxes I suddenly can't write off. Additional check writing at tax time ~$300k. Just sending in the last $75k of that tonight.

Cheers

Sounds terrible.

Congrats on your misfortune. At least I know I'm not the unluckiest "rich" guy

[sf_tech_saver]

I got lucky and had the SALT swap out during a year with a windfall in CA. Cost: $700k in CA taxes I suddenly can't write off. Additional check writing at tax time ~$300k. Just sending in the last $75k of that tonight.

Cheers

Sounds terrible.

Congrats on your misfortune. At least I know I'm not the unluckiest "rich" guy

Rich is so so relative to cost of living... I'm lucky but far from retired......not complaining just sharing that, yes, this tax change was a huge impact/deal. I'm surprised its been so quietly accepted. I also bought a condo in SF and suddenly the property tax isn't' deductible going forward either.

Now you know why half my posts on here are about tax free California Municipal bonds

[bhsince87]

Not here, in PA. Paid about $5,000 less.

[JustSomeGuy155]

Rich is so so relative to cost of living... I'm lucky but far from retired......not complaining just sharing that, yes, this tax change was a huge impact/deal. I'm surprised its been so quietly accepted. I also bought a condo in SF and suddenly the property tax isn't' deductible going forward either.

Now you know why half my posts on here are about tax free California Municipal bonds

I'm also surprised I haven't heard more about it in my workplace, where there's a bunch of other high-income earners in a high-tax state. I'm guessing they just pay what their accountant/turbotax tells them without thinking much about it.

Actually, maybe that's a better strategy than stressing over it like me.

[JustSomeGuy155]

Not here, in PA. Paid about $5,000 less.

Lucky you! Tell us more, did you take the standard deduction?

[mariezzz]

I got a tax increase due to lack of personal exemption - would have been better off with 2017 tax laws.

In case you missed it: if you paid at least 80% of the tax due there isn't a penalty (IRS announced this last Fri).

[libralibra]

post removed

[wootwoot]

Not here, in PA. Paid about $5,000 less.

Same here in AZ.

[Skierajs]

I got lucky and had the SALT swap out during a year with a windfall in CA. Cost: $700k in CA taxes I suddenly can't write off. Additional check writing at tax time ~$300k. Just sending in the last $75k of that tonight.

Cheers

I wouldn’t be so sure... The AMT would have probably got you anyway and SALT was not deductible under AMT anyway. But, TCJA increased the AMT exemption, so you might even be paying less than before. Run your 2018 income through TT 2017 and see if you really want to know...

[sambb]

the rich can afford it, or move.. hard to change back

[Eric76]

The thing about the new tax law that bugs me is that I bought my home in 2015 thinking I would derive a tax benefit by itemizing, but with the 24k standard marital deduction, and itemized deductions at 23k, I may as well be renting. The TCJA eems to disincentivize home ownership.

[986racer]

I’m surprised you werent hit by AMT last year. For those who had AMT, generally the tax change is a net win since SALT wasn’t deductible under AMT

[slick_dealer_05]

Move to a smaller/cheaper house?
It never made any sense to me why US gov was subsidizing home ownership and mortgages for people buying expensive homes (before SALT).

[beyou]

If you can deduct 10k in SALT, and the single std deduction is $12k, you didn’t have more than $2k in other deductions ? I realize most of your $80k was salt, but your post left me wondering if you could have done a bit better on your taxes.

For me the changes had little net impact.
Less deductions, but lower tax rates.
Somewhat of a wash, maybe even came out a bit better (and I do live in a high local tax area).

[indexonlyplease]

After doing taxes this year I like the standard 24k deductions for married couples. No saving receipts, no need to itemize and no need to carry debt to gain on a tax deduction. So, we pay our share of taxes and don't worry about trying to come up with some way to gain a tax break.

Yes, I also paid more in taxes this year but not because of the change but because I made more money. Now the vacation home I will purchase soon will neeed to be paid in cash becasue there is no benefti to getting a deduction.

Also, cant complain about going from 25% tax bracket to 22% tax bracket.

[arf30]

Got hit here - $3500 federal refund last year, have to pay $9500 this year. State taxes were unchanged. I changed my W4 from 2 to 0, hopefully that helps a bit for next year.

[g2morrow]

Move to Florida.

It's an idea, but my income could decrease more than my tax bill. I'd also have to check with all the important people in my life who don't live in Florida

Don't worry, they'll come visit you!

[cdu7]

Being married with kids helps a lot: double standard deduction, higher bracket limits, child tax credits. All of those essentially evened it out for us. We may have still paid a bit more, but your case seems especially painful losing 80k+ deductions.

[dknightd]

With all the various changes I broke about even. Lower marginal rate, but about the same total rate.
Used to itemize. Now taking the standard deduction. Unless the laws, or my situation, changes, I won't even bother seeing if I should itemize next year - I'll just assume the standard deduction is slightly better. That change will speed up my filing process

[jharkin]

I stopped itemizing due to SALT, but ended up paying quite a bit less overall due to the new brackets and larger CTC.

[Bacchus01]

the rich can afford it, or move.. hard to change back

How did you determine that?

[Bacchus01]

Got hit here - $3500 federal refund last year, have to pay $9500 this year. State taxes were unchanged. I changed my W4 from 2 to 0, hopefully that helps a bit for next year.

Your data posted does not say whether your taxes went up or down.

[JoeRetire]

Did anybody else here get a huge tax increase as a result of the cap on the SALT deduction?

Got an increase. It wasn't huge.

I knew the tax law changes were going to hit high-earners in high-tax states but I hadn't seen too many threads/complaints around tax-time on this board, so I figured it wouldn't be too bad. Rude surprise, my tax rate increased by 4% and I am writing a mid 5-figure check to the IRS due to underwitholding

Yup. Some winners, some losers.
We were all warned about the witholding changes. Some reacted, others didn't.

I realize how lucky I am to have this problem, but it still hurts to write the five-figure check. I think it'll be the biggest check I've ever written! Anyone else thinking about how to reduce taxes for next year? Do you have any suggestions for me?

Obviously, you don't have to write a check at all next year. Just change your witholdings.

[indexonlyplease]

Does everyone remember that your pay checked increased when the new tax law took place. I did see my pension check increase. I believe the increase was from the 25 to 22 percent tax bracket.

[stan1]

I don't have any other significant deductions to take, so I'm taking the standard deduction of $12k. Last year, I was able to deduct over $80k in itemized deductions due to SALT as well as some charitable contributions. The result this year is my effective federal tax rate went from 26% to 30%. This is from W2 income in the 37% marginal bracket. My investment portfolio is pretty tax efficient and does not contribute much to the tax burden.

I realize how lucky I am to have this problem, but it still hurts to write the five-figure check. I think it'll be the biggest check I've ever written! Anyone else thinking about how to reduce taxes for next year? Do you have any suggestions for me?

Sounds like very high income single no kids no mortgage? Maybe you weren't paying AMT in the past? You got the hardest hit and are probably in the 1% or even 0.1% of the population set. Maybe consider bunching your charitable contributions into a donor advised fund which will push you over the standard deduction in the years you contribute.

[stan1]

Does everyone remember that your pay checked increased when the new tax law took place. I did see my pension check increase. I believe the increase was from the 25 to 22 percent tax bracket.

Yes, after one pay check I looked at my pay stub and said "oh this doesn't look good" and did a quick calculation of withholding. I realized I needed to significantly increase withholding and did so immediately. I looked at it again in October and said "oh, its still too low" and took out even more. So the pay bump wasn't very much and I ended up owing about $200 in tax due which is about where I like to be each year.

[indexonlyplease]

Does everyone remember that your pay checked increased when the new tax law took place. I did see my pension check increase. I believe the increase was from the 25 to 22 percent tax bracket.

Yes, after one pay check I looked at my pay stub and said "oh this doesn't look good" and did a quick calculation of withholding. I realized I needed to significantly increase withholding and did so immediately. I looked at it again in October and said "oh, its still too low" and took out even more. So the pay bump wasn't very much and I ended up owing about $200 in tax due which is about where I like to be each year.

Me too. I was at the almost break even for the last few years. Adjusted each year. Last year paid $250.00. This year paid $4500.00 because of part time job. But they took out to little in tax. Had to adjust again. I am with you, getting to break even at the end of the year is the goal. Or at least close.

[JustSomeGuy155]

I’m surprised you werent hit by AMT last year. For those who had AMT, generally the tax change is a net win since SALT wasn’t deductible under AMT

I ended up paying about $6k extra for AMT last year. I suppose due to the higher AMT thresholds and my inability to take significant deductions, I am no longer affected by the AMT, but the standard tax increased much more than the extra I paid in AMT.

[JustSomeGuy155]

I knew the tax law changes were going to hit high-earners in high-tax states but I hadn't seen too many threads/complaints around tax-time on this board, so I figured it wouldn't be too bad. Rude surprise, my tax rate increased by 4% and I am writing a mid 5-figure check to the IRS due to underwitholding

Yup. Some winners, some losers.
We were all warned about the witholding changes. Some reacted, others didn't.

I actually did remove all my deductions and figured that would be close enough to avoid a penalty, but obviously I should have taken a closer look!

I believe my problem was that the supplemental witholding rate also changed from 25% to 22% and a significant proportion of my compensation is in stock. So I ended up withholding about the same as last year. This year I'll have to specify to withhold extra from each paycheck in addition to taking 0 deductions.

[JustSomeGuy155]

Sounds like very high income single no kids no mortgage? Maybe you weren't paying AMT in the past? You got the hardest hit and are probably in the 1% or even 0.1% of the population set.

Yes: high income, no kids, no mortgage. Last year I paid about $6k extra for AMT. I am in the 1%, but now that I pay a total tax rate of over 40%, I can't be one of the baddies, right?

Maybe consider bunching your charitable contributions into a donor advised fund which will push you over the standard deduction in the years you contribute.

I actually did this last year (made 3 years worth of charitable donations to a donor advised fund, and took them as itemized deductions). I suppose that's another reason the tax rate was so high this year.

[Typ997S]

I’m surprised you werent hit by AMT last year. For those who had AMT, generally the tax change is a net win since SALT wasn’t deductible under AMT

^This. For me, the AMT reduction and lower marginal rates resulted in a (small) reduction.

...and I approve of the user name!

[JustSomeGuy155]

If you can deduct 10k in SALT, and the single std deduction is $12k, you didn’t have more than $2k in other deductions ? I realize most of your $80k was salt, but your post left me wondering if you could have done a bit better on your taxes.

I did not have more than $2k other deductions. No house, no dependents, made a large contribution to a donor advised fund last year to take full advantage of the itemized deduction since I know it would be more effective than splitting up my yearly donations.

What other deductions are you all taking advantage of?

[cookymonster]

Another way to look at this is that you got a five figure interest free loan (assuming no penalty). that's a pretty big win in my book. I try to owe thousands on my tax return every year.

[dknightd]

If you can deduct 10k in SALT, and the single std deduction is $12k, you didn’t have more than $2k in other deductions ? I realize most of your $80k was salt, but your post left me wondering if you could have done a bit better on your taxes.

I did not have more than $2k other deductions. No house, no dependents, made a large contribution to a donor advised fund last year to take full advantage of the itemized deduction since I know it would be more effective than splitting up my yearly donations.

What other deductions are you all taking advantage of?

Just pay your taxes. Smile and be happy

[nepats]

I feel your pain We paid less than last year due to AMT phaseout, Child Credit and QBI. Surprisingly, the effective tax rate was the lowest it has ever been even with the loss of SALT and taking standard deduction

[Thegame14]

Hurt me a good amount since my property taxes alone are $12K, but really hurt my parents they pay around $25K in property taxes.

[Cyclesafe]

I ran 2017 TurboTax with 2018 numbers and am better off by $15.6k due to lower marginal rates and no AMT. However, I NEVER would have purposely realized so much income in 2018 as to incur AMT if there hadn't been a change. There are so many moving parts that one simply cannot assess whether one is better off today without running the old software. Remember also that the law reverts for tax year 2026.

[dillius]

Married no kids. Last year got a $3k refund, this year owe $5k.

Not in a high tax state either, but our itemized deductions total just under the new standard deduction.

[JackoC]

Did anybody else here get a huge tax increase as a result of the cap on the SALT deduction?

I knew the tax law changes were going to hit high-earners in high-tax states but I hadn't seen too many threads/complaints around tax-time on this board, so I figured it wouldn't be too bad. Rude surprise, my tax rate increased by 4% and I am writing a mid 5-figure check to the IRS due to underwitholding

Maybe it was explained later, but is 'five figures' how much more total federal tax was due on the same exact income? The 'underwithheld' part is a little confusing.

After finishing my 2018 taxes, I mocked up my exact income and deductions from 2017 in Turbotax 2018. The net federal tax including credits came out $1,424 higher than in Turbotax 2017*. However, the new law would have allowed me a $1,955 higher foreign tax credit in 2017 (the SALT limitation allows more FTC to be used all else equal), but if you don't get to claim a FTC now you can carry it over for up to 10 yrs and might claim it later. I often find that FTC makes federal tax analysis ambiguous for me. IOW assuming the unused credit under 2017's law would eventually have expired the new law 'only' cost me $1,424 on 2017's situation. But assuming I'd eventually have been able to use the carry forward under pre 2018 law, the new law cost me $3,379, plus or minus the timing difference of when the FTC was used.

This is in NJ. Our prop taxes alone are >>$10k. And our charitable contributions alone are >> the new standard deduction so the increase in std deduction did not benefit us. I wrote a much larger balance check than the above numbers, but income was also significantly higher in 2018 so a raw comparison of tax paid in 2017 v 2018 wouldn't be meaningful.

*I didn't bother to do it in the other direction, how 2018's income and deductions would have fared under 2017's law.

[CoAndy]

It's weird how the news keeps saying that the middle class got stiffed while the rich gained, but around here it's just the opposite. The politicians in the high tax states keep complaining too, but it seems to mainly hit people in the higher brackets (and million dollar houses), which is not the majority of Americans.

However, I do think there's a lot of confusion about whether the average person gained or lost since the withholding rates were changed and somehow were off.

I was thinking the same thing. I can't tell you how many times I opened up a "news" story to read the tax bill was "a giveaway to corporations and high earners". Oh well...can't say I am surprised.

[david_that_guy]

My total federal taxes went up slightly ($338) with very close to the same income due to the SALT changes. In my case, the increase in the standard deduction almost completely made up for what I couldn't deduct, but not quite. It's still annoying to have even a slight increase when the overall tax cut was large. It just seems unfair. Of course, I'm being ridiculous complaining about $338.