Fifty percent of accountants surveyed by the New Jersey Society of Certified Public Accountants (NJCPA) say their clients’ net tax bills have gone up because of the $10,000 cap on the state and local tax (SALT) deduction that was put in place in 2017, NJCPA said Thursday.
This compares with 30% of respondents who said their clients’ net tax bill had not gone up and 20% who were unsure.
Additionally, 65% of clients whose net income is between $150,000 and $324,999 had their net tax bill rise, and 64% of clients in the $325,000 to $999,999 income tax bracket saw an increase, the NJCPA survey found.
The survey taken by 325 CPAs in January was created to gauge the impact of the $10,000 cap on SALT deductions imposed by the Tax Cuts and Jobs Act (TCJA) of 2017. The cap will expire at the end of this year, along with other changes to the tax code, unless Congress votes to extend it.
Respondents were also asked the amount the $10,000 cap should be raised to, if it is not eliminated completely, to provide tax relief for middle-class New Jersey families. Thirty-seven percent said the cap should be raised to $30,000; 28% said $20,000; and 22% said $50,000.
New Jersey’s property taxes and state income tax rates are among the nation’s highest, which is why the $10,000 SALT deduction cap has a disproportionate impact on Garden State taxpayers.
More than 55% of accountants surveyed said the $10,000 SALT cap either somewhat or definitely influenced their advice to clients to move out of New Jersey, while 44% said it did not.
Some respondents explained that the loss of the use of the full deduction made it a “net negative impact” for certain taxpayers, and getting rid of the cap entirely would help those in high-tax states like New Jersey. As one respondent noted, “Homeownership is becoming further out of reach for your average income earner.”
Other respondents explained that higher-income earners were generally subject to the alternative minimum tax (AMT), which limits the percentage of taxes paid to the federal government regardless of deductions, and fewer paid the AMT under the TCJA. One participant noted that those taxpayers in income brackets between 15% and 39.6% generally experienced less tax than before the SALT cap.
“Surveys like this show us what a crucial role CPAs play in our society and in helping individual taxpayers and businesses thrive. Our members, who are well-versed in state and federal regulations, are a significant resource to communities and legislators,” said Aiysha (AJ) Johnson, MA, IOM, CEO and executive director at the NJCPA.
