Just Add SALT

By: Andrew T. Gardener, CFP®


No doubt you have read about potential tax increases if the Democrats control the White House and both chambers of Congress. What you may not have read about is the potential reinstatement of a deduction lost over the last 3 years.

First, some background: The 2017 tax act placed a cap on SALT (state and local taxes) itemized deductions for all taxpayers. The new annual limits were set at $10,000 for single taxpayers and $20,000 for joint taxpayers. The result has been a loss of previously allowed deductions for many Americans. For example, if you are a single taxpayer and you paid a total of $18,000 in SALT taxes last year, you were only allowed to itemize $10,000. For a single taxpayer in the 32% bracket, that would have been a real loss of $2560.

Both Chuck Schumer (D-NY) and Nancy Pelosi (D-CA) have indicated that they would like to lift the SALT cap, and the House passed a bill last year to do just that.

What can you do about this? Since the primary ingredient for SALT in Texas is property taxes and since Texas allows property owners the discretion to pay property taxes in either December or January….

You may want to consider maximizing your SALT payments this December, but only up to your legal deductible cap ($10,000 for single or $20,000 for joint). Then pay any property tax you owe above that in January 2021. If the law is amended in 2021 to lift the cap, you could then stack that tax paid in January on top of whatever you pay in December 2021 to fully maximize your deductions. In addition, if you paid your 2019 property tax in January 2020, you have already used up some or all of your 2020 limit. That just means you may have the benefit to delay even more property tax payments until January 2021. If the law does not change, you’ve lost nothing. If it does change, you may be able to maximize your tax deductions.

This may not benefit residents of states other than Texas. We recommend you consult with your tax advisor before deploying any tax strategy.


Written by: Andrew T. Gardener, CFP®