Thursday, January 11, 2018


There has been much talk about the effects of the limited $10,000 - $5,000 if Married Filing Separately -  itemized deduction for property taxes and state and local income or sales taxes combined in the GOP Tax Act. 

However, something that has not been mentioned, at least in what I have read, is the fact that this limitation substantially increases the Marriage Tax Penalty.

Two working single individuals, either living together or separately, who itemize can each claim a deduction of up to $10,000 in combined property taxes and state and local income or sales taxes.  That is a total of $20,000 in itemized deductions on the 2 returns. 

For residents of New Jersey, where my clients are from, it is not hard for each individual to reach the $10,000 maximum, or come close to it, even if they both own and live in one home.

If these two individuals, who both work and have their own separate income, were married the itemized deduction would still be limited to $10,000.  Filing separately would not make any difference, as everything I have read specifically identifies the limitation as $5,000 for married taxpayers filing separate returns. 

So, by having joined together in holy wedlock this dual-income couple will probably be paying tax on $10,000 more in net taxable income, which would, again in New Jersey, result in over $2,000 in additional federal income tax.  This tax penalty could be increased if the state tax return follows the federal return.   

I wonder if this is what the idiots in Congress intended.  Of it they actually gave the matter any thought.

Just saying.


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