Spin-Off to Taxes Question

The other post reminded me of this other issue I've been thinking about since they announced the new tax law. I think there's a marriage penalty in it!

There is a cap of $10K for SALT (State and Local Taxes), regardless of filing status. So, a married couple can deduct a total of $10K in SALT and a single person also can deduct $10K. The Standard Deduction, however, is $24K for married couples and $12K for single people.

So, assume this scenario:

$11,00 in property taxes
$3,600 in NYS income tax for Person A
$3,600 in NYS income tax for Person B
$7,000 in mortgage interest
$2,000 in charities, other deductions

With a $10K cap, a married couple would have $19,000 in deductions:

$10,00 in property taxes
$7,000 in mortgage interest
$2,000 in charities, other deductions

Since this is less than the standard deduction of $24,000, they would take the $24K.

But, if those same people are not legally married, but live together and both own the house, they can split the costs and each have $13,600 in deductions:

$5,500 in property taxes
$3,600 in NYS income tax
$3,500 in mortgage interest
$1,000 in charities, other deductions

Since this is greater than the $12K standard deduction, they can take the full $13,600 deduction each, for a total of $27,200, which is more than the $24K that the married couple can take.

I don't know if there are other differences in the tax law, but the fact that it's $10K for everyone really bothers me!

Re: Spin-Off to Taxes Question

the law is very skewed and definitely hurts married people without children who own a home

Re: Spin-Off to Taxes Question

It could be, but you aren't taking the full tax law into account. Tax brackets are different from single vs married. There are also several credits that you cannot take or are limited if you're married filing separately like the Earned Income Tax Credit.