Understanding the SALT Deduction Limit when buying a home - impact on taxes

The SALT deduction is often misunderstood, so I'm glad you're asking before making a big purchase decision. Let me clarify how this works. First, you're right that there's a $10,000 cap on State And Local Tax (SALT) deductions. This includes your state income tax, property tax, and sales tax (though most people only deduct either income OR sales tax, not both). In your first example, where you'd have $30k in SALT ($12k income tax + $18k property tax), you can only deduct $10k of that total due to the cap. However, this doesn't mean your total itemized deduction is just $10k. You'd still need to add other potential itemized deductions like mortgage interest, charitable contributions, etc. For your second scenario with $20k in SALT, yes, you'd still be limited to deducting only $10k of that amount. Again, you'd add this to your other itemized deductions to determine if itemizing beats the standard deduction. Remember that itemizing only makes sense if your total itemized deductions exceed the standard deduction ($12,950 for single filers). The SALT cap definitely makes it harder to benefit from itemizing than in the past.

I went through this exact same situation last year and discovered taxr.ai (https://taxr.ai) which was a lifesaver for me. I kept getting confused about the SALT limitations since I moved from a low property tax state to a high one. Their system analyzed my documents and explained exactly how the SALT cap would impact my specific situation. It broke down my potential deductions and showed me scenarios based on my mortgage interest, state income tax, and property taxes. It was way clearer than the circular explanations I was getting online. What I really appreciated was that it helped me understand what my break-even point was - at what purchase price and tax amount itemizing would actually benefit me. Saved me hours of spreadsheet calculations!

Just wanted to update everyone since I mentioned being skeptical earlier. I checked out taxr.ai after posting here and it was actually really helpful for my situation. I was considering two different homes with very different property tax situations (one in a township with higher taxes but better services). Their tool helped me see the real tax impact of each property and how much of those property taxes I could actually benefit from deducting. The analysis showed me that in one case, I'd still be better off with the standard deduction despite the high property taxes, which wasn't what I expected! Saved me from making assumptions that would have cost me thousands. Definitely worth checking out if you're in a similar situation.

Something else to consider - if you're trying to reach the IRS to ask specific questions about your SALT deduction situation, good luck! I spent DAYS trying to get through to a human. After hitting dead ends with the regular IRS number, I found this service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in about 15 minutes. They have this system where they navigate the IRS phone tree for you and then call you when they've got an agent on the line. You can see exactly how it works here: https://youtu.be/_kiP6q8DX5c I was skeptical at first, but I had specific questions about my SALT deductions that weren't answered by the general guidance, and I needed to speak to someone who could look at my specific tax situation. Totally changed my approach to tax planning.

I have to eat my words from my previous comment. After waiting on hold with the IRS for almost 2 hours yesterday and getting disconnected AGAIN, I decided to try Claimyr out of desperation. It actually worked exactly as advertised. I got a call back in about 20 minutes saying they had an IRS agent on the line. I was able to ask my specific questions about the SALT deduction as it related to my second home purchase, and got clear answers that my CPA hadn't been able to provide. The agent confirmed that yes, I can only deduct up to $10k total for all state and local taxes combined, but also pointed me to some specific deductions related to my home office that I hadn't considered. Saved me way more time than I expected and actually got my questions answered.

Something else to consider with the SALT deduction - if you're married filing jointly, you're still limited to $10k total for both of you combined! That's a major drawback compared to the pre-2018 rules. Also, don't forget about mortgage interest. With today's higher interest rates, you might be paying a lot more in interest, which is deductible on loans up to $750k. That plus your $10k SALT might push you well over the standard deduction threshold. I was in a similar situation last year and discovered that once I added everything up (SALT at $10k cap + mortgage interest + charitable deductions), itemizing saved me about $4,500 compared to the standard deduction.

One thing none of these comments mentioned - the SALT cap is scheduled to expire after 2025! So if you're buying a home now, in just a couple years the cap might go away and you could potentially deduct your full SALT amount again. Of course, Congress could extend the cap or create a new limit, but it's worth keeping in mind for long-term planning.

Great discussion everyone! As someone who went through this exact analysis last year, I wanted to add a few practical tips for @cc288379ec13: 1. Don't forget about PMI - if you're putting less than 20% down, your mortgage insurance premiums are also deductible (subject to income limits). This can add another $1-3k to your itemized deductions. 2. Track your charitable contributions more carefully once you're itemizing. Even small donations to Goodwill, church offerings, etc. can add up to meaningful deductions. 3. Consider timing some deductions strategically. For example, if you're close to the itemizing threshold, you might want to bunch charitable contributions into alternating years to maximize the benefit. The $18k property tax you mentioned is indeed high, but if you're in a state like NY, NJ, or CA, that's unfortunately pretty normal for decent areas. Just make sure you factor in the tax benefits when comparing the total cost of homeownership vs. renting. One last thing - property taxes can increase over time, but your deduction will still be capped at $10k, so factor that into your long-term planning.