There are so many tax deductions by IRS which did not survive the process of tax reform and would not be available anymore. But, the deductions for local as well as state taxes, that include the deduction of property tax, made this through -- kind of. Hence, its short answer would be yes, the property tax is still deductible.
Although, the Tax Cuts & Jobs Act actually made a big alteration to the deductions for local as well as state taxes which can limit an amount that you could deduct. What is more, the biggest change to a tax code can make this so that in case you give the property taxes, even then you would not take a benefit of the deductions at all.
Are property taxes still deductible in 2018? This in mind, here is what an American who gives local or state property taxes wants to know the revised local and state taxes, and SALT, deduction.
Revised SALT Deduction
Deduction for local as well as state taxes, known as SALT deduction, is lucrative for various taxpayers -- especially those people who reside in the high-tax states that include New Jersey, New York, and California. Such deduction also includes paid locally as well as state property taxes, and either local & state sales taxes or income taxes. This has also become the most contentious part of the tax reforms process.
There are various Republicans who wanted to remove the deduction completely, but after the compromise, this SALT deduction actually survived. But, the Jobs Act and Tax Cuts put 10,000 dollars yearly cap on deductions.
It’s a disappointment to the taxpayers living in the high-tax areas. For instance, an average SALT deduction paid in the New York City was above 21,000 dollars in a current tax year. Hence, the average NYC taxpayers who have already claimed this SALT deduction in the history will also see their deductible amount cuts by even above half.
Do Not Forget the Higher Standard Deduction
Moreover, you must keep this in your mind that SALT deduction is actually itemized deduction that means to use this; you’ve to itemize the deductions on a tax return.
Here is why this matters. The Tax Cuts & Jobs Act almost doubled the standard deductions to 12,000 dollars for the unmarried filers, 18,000 dollars for the household heads, and 24,000 dollars for the married people filing the joint returns. Hence, various people could not use this newly decreased SALT deduction, although they will qualify otherwise for this.
Like an example, let us say that you are a married couple who has filed the joint tax return. Also, you reside in the high-tax state. You have paid the property taxes of 12,000 dollars and then state tax of 18,000 dollars in the year 2018. Due to the decreased SALT deduction, although you have paid 30,000 dollars in the local as well as state taxes, just 10,000 dollars of the amount is typically deductible.
But, the standard deduction is about 24,000 dollars. And, the itemized deductions must be above this amount. You can also say that unless you’ve another 14,000 dollars in some other itemized deduction, just like charitable contributions and mortgage interest, you could not use the SALT deduction. Also, the Tax Cuts & Jobs Act has already removed so many other itemizable deductions that would make the justifying itemizing more tough for various people.
In reality, just about 5 percent of the taxpayers might itemize the deductions starting in the year 2018. In the most recent years, almost about 30 percent of the tax returns consisted of the itemized deductions. This means that 5 out of 6 people who typically itemize their deductions would no more be able to.
The Bottom Line
A bottom line of the above discussion is that yeah, the property taxes are actually deductible in the year 2018. But, the Tax Cuts & Jobs Act limited the deductions, specifically for the taxpayers in those states where they need this deduction very much. While you see this fact then combined with a high standard deduction which would not make the itemizing worthwhile for many people, it is good to say that just a little percentage of the taxpayers would do the property tax deductions in the year 2018.