The new Tax Reform limits the amount of state and local taxes you can claim as an itemized deduction on your return to $10,000. This amount is inclusive of income, real estate and sales tax. Amounts in excess of the $10,000 cannot be claimed as an itemized deduction on your tax return.
What does this mean for my refund? For most taxpayers, the increased standard deduction will help to counter the limitation of the state and local income tax deduction. The Tax Cuts and Jobs Act (TCJA) increased the standard deduction from $6,300 to $12,000 for single filers and from $12,600 to $24,000 for married couples filing jointly.
Taxpayers living in high income tax states such as California, New York, New Jersey, Illinois and Connecticut, will be impacted the most. For individuals living in these high-income-tax states, look to the states to propose new credits or deductions to offset the limitation on the State and Local Tax (SALT) deductions.