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Eugene Pollingue, partner in the West Palm Beach office of Arnstein & Lehr.

As a result of the 2017 Tax Cuts and Jobs Act, it is now even more advantageous to be a resident of Florida or a resident of another state that does not impose a state income tax. Prior to 2018, state and local taxes were fully deductible as an itemized deduction on an individual’s federal income tax return. That all changed as a result of the 2017 Tax Cuts and Jobs Act. Beginning in 2018 and ending in 2025, the deduction for state and local taxes is limited to $10,000 (or $5,000 for married couples filing separately). Furthermore, during this same time period the standard deduction has been increased to $24,000 for joint filers, to $18,000 for heads of households, and to $12,000 for singles and marrieds filing separately. Therefore, not only is the state and local tax deduction capped, but with the increased standard deduction, the capped state and local tax deduction may not provide any benefit. Itemized deductions will only result in a tax benefit if they are greater than the standard deduction. If all itemized deductions, which include the deduction for state and local tax capped at $10,000, are less than the standard deduction, the taxpayer will deduct the standard deduction and the state and local tax deduction will result in no tax savings. As a result, living in a state that has income tax can be even more expensive than before the new tax law, because now the deduction for state and local taxes may not provide a tax benefit on one’s federal income tax return.

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