A proposed change in the Republican plan to redefine the federal tax code is basically impractical to Long Island property owners while enormously affecting their capability to take a property tax deduction. This is what critics and analysts said after a long-awaited proposal was disclosed.
Under the current plan that has the backing of President Donald J Trump, property owners who itemized their returns will no longer be allowed to deduct the amount of money paid in their state income taxes from their federal taxes. They will only be able to deduct the maximum amount of $10,000 in property taxes. According to the latest taxation reviews, this proposal will hurt high-income earners and high taxation states such as New York, especially Nassau and Suffolk Counties.
This proposal has been slightly steered by the GOP. It has not significantly changed from the original draft in regard to local deductions, but there are slight changes. The republican house proposed a plan to cap this at $10,000. According to analysts, the cap will be able to cover property owners in most in the upstate counties, but most experts also said that most of the homeowners would be left out in Suffolk and Nassau counties.
“Any elimination or reduction of these deductions will hurt most Long Islanders and the $10,000 cap is virtually useless to Long Islanders who on average pay more in property taxes and state income taxes than any other region in the country,” said Kevin Law, CEO of the Long Island Association, a pro-business group.
The average amount of Nassau deductions for local and state income taxes is $15.213 with another amounting $12.683 for property tax deductions. This is according to a recent report released by the state comptroller’s office. Suffolk’s deduction is $10,934 and $10,387, consequently. As we have said, this is according to the new Republican plan. Under this plan, the property owner will be unable to deduct income tax payments and will most likely see his/her property tax deductions capped at $10,000. This would basically mean that most Long Islanders would lose deductions of $10,000 or more.
It is important to note that mortgage interest deductions will be maintained but only limited for newly bought homes up to $500,000. The loss of these deductions is estimated to result in an amount of $2 billion dollars annually. According to LIA projections, this will greatly hit Suffolk and Nassau economies. They have confirmed that the rates could drop as much as 10% according to the GOP plan. This is according to State Realtors Association.
“Our initial read of the House tax proposal released today is that it will harm many New York homeowners,” Duncan MacKenzie, head of the realtors’ group, said in a statement. “It will lessen the value of the property tax deduction and it cuts a host of other key housing-related tax incentives.”
The National Home Builders Association that have been offering tremendous support to Republican candidates are opposed to the GOP tax plan in its current plan. Those who back the plan believes and promotes the idea of doubling the standard deductions even though it would be primarily for those living in lower tax states. This includes the South and South West. There is also a very decent provision that aims at eliminating an alternative minimum tax that affects most households that make about $200,000-$1 million dollars per year. This is according to a report released by LIA. They also confirmed that the plan would not offset the loss of deductions.
The effect on property tax and state tax deductions are fundamental reasons why 7 of the 9 Republicans in New York delegation are opposed to the plan.
“I am a ‘No’ to this bill in its current form . . . Adding back in the property tax deduction up to $10,000 is progress, but not enough progress,” Rep. Lee Zeldin (R-Shirley) said.
“They call it a tax-cut plan, excuse me . . . In the state of New York, it’s a tax increase plan,” Gov. Andrew M. Cuomo said, calling the loss of state and local deduction “diabolical.”
Now more than ever, we strongly urge all Nassau and Suffolk homeowners to grieve their property taxes prior to the respective filing deadlines. In Suffolk County this year’s filing deadline is May 15, 2018, Nassau is March 1, 2018.