The basic tax structure in the United States went through a major overhaul with the Tax Cuts and Jobs Act (TCJA) about three years ago. One major change involved limits on the deductions taxpayers could take on their federal tax returns for state and local tax payments, known as the SALT deduction. Tax professionals throughout the country monitored this change to see how it impacted different states, particularly high tax states like New York and California.
Now that a few years have passed, it is helpful to have an updated look at the impact of these changes on residents in high tax states.
Was there a mass exodus?
Although initial data supported the theory of a mass exodus, new data brings this into question. A recent report finds that bidding wars and moving data show increased interest in California, one of the highest tax states in the country. This could be due to tax planning strategies to help minimize the impact of the TCJA.
There is one notable exception. Big cities like San Francisco have not reported an increase and instead have experienced a “large” year-over-year loss of residents. Many of these residents simply moved in state to a different location. The same could hold true for another high-tax big city: New York City. We will delve deeper into the statistics for NYC when more data is available.
Are there strategies for entrepreneurs who want to operate in high tax states?
Business leaders can use various tax planning strategies to make the most of business operations while minimizing the impact of tax obligations. The first step is to choose the business structure carefully as different business structures have different tax obligations. The attorneys at Goldburd McCone are experienced in this area of law and can discuss your options to better ensure you can choose the right business structure for your needs.