New tax law hurts homeowners. As taxpayers sort through the new regulations signed into law by the Tax Cuts and Jobs Act, one demographic is feeling particularly hard hit: Middle Class homeowners who live in high tax areas. Many are just now learning they owe thousands this year rather than getting the refunds they usually received. Their problem sits with the new deduction cap on state and local taxes, which the law caps at $10,000. Before 2018, taxpayers were allowed to deduct their total combined state and local tax from their federal taxes, softening the blow of high property and income taxes in states like New Jersey and California.
New law hurts homeowners. The impact of the new law is keenly felt by middle class homeowners who live in towns with high property taxes, which some told CBS Money Watch they choose for their great schools. Getting slammed by higher taxes under the new law has prompted some to rethink their plans, even mulling moving their kids after they graduate from high school. Making it worse, they say, is a perception that the SALT deduction cap is only hitting wealthy families, which they say isn’t accurate.
“The rest of the country thinks it’s only affecting people who are wealthy and who can afford it, but we know that it’s not the case,” said Kate Fawcett, who lives in Glen Ridge, New Jersey. “This is just going to wipe us out.” 11 million taxpayers hit by the tax say Fawcett isn’t alone. Almost 11 million taxpayers in high tax states like New Jersey will lose out on $323 billion in deductions because of the SALT deduction cap, The Treasury Department estimated last month.
About 80 percent of the full SALT deduction had benefited Americans earning more than $100,000 per year, according to the Tax Foundation. But families in high states like New York and New Jersey have a higher cost of living, where $100,000 doesn’t stretch as far.