The Tax Cuts and Jobs Act (TCJA) limited the SALT deduction to $10,000. This change limited taxpayers in the amount of taxes they could deduct for payments to cover property, income and sales tax obligations at the state level.
The Treasury Inspector General for Tax Administration estimated the change would impact 10.9 million taxpayers, mostly from New York and California.
What can taxpayers do to counter this change? There are tax planning strategies to reduce one’s tax burden. When it comes to changes that result from the SALT deduction limitation, a taxpayer could review and potentially challenge their property’s assessed value.
If successful, this can result in a lower property tax bill.
How can a New Yorker challenge their property’s assessed value? Property owners receive a notice of property value from the New York City Department of Finance. This document includes a description of the property, the name of the property owner, the street address and the estimated market value as well as the assessed value and the tax class.
The agency explains that a taxpayer can challenge the assessed value by appealing the current value with the New York City Tax Commission. This could lead to four possible outcomes:
- Denial of request. The agency could simply deny the request. If denied, the taxpayer can take further action potentially including an appeal.
- Reduction. The agency could grant a reduction of the property’s assessed value.
- Tax class. The Tax Commission may choose to change the property’s tax class. There are four tax classes in New York City. Class 1 includes most residential family homes and smaller rental properties. Class 2 is defined by the city as residential rental properties that are not part of the first class. Class 3 is composed of utility properties and Class 4 is commercial and industrial units.
- Exemptions. Exemptions are available for the following: STAR participants, senior citizens, veterans, those with disabilities, clergy members, J51, 421A or nonprofit organizations. A property can get an exemption if it qualifies in one of these categories.
This is just one tax planning strategy that can reduce your tax obligations. The attorneys at Goldburd McCone can discuss this and other tax planning strategies.