Fifty percent of accountants surveyed by the New Jersey Society of Certified Public Accountants (NJCPA) reported that their clients' net tax bills have increased due to the $10,000 cap on state and local tax (SALT) deductions, implemented in 2017. This contrasts with 30% of respondents who noted no increase in their clients' net tax bills, while 20% were uncertain.
The NJCPA survey revealed that 65% of clients with a net income between $150,000 and $324,999 experienced an increase in their net tax bill. Similarly, 64% of those earning between $325,000 and $999,999 saw a rise. Conducted among 325 CPAs in January, the survey aimed to assess the impact of the SALT deduction cap imposed by the Tax Cuts and Jobs Act (TCJA) of 2017. The cap is set to expire at year-end unless Congress decides otherwise.
Respondents were also asked about potential adjustments to the cap for middle-class New Jersey families if it is not completely removed. Thirty-seven percent suggested raising it to $30,000; 28% recommended $20,000; and 22% proposed $50,000.
New Jersey's high property taxes and state income tax rates mean that the SALT deduction cap significantly affects its taxpayers. Over half of the accountants surveyed indicated that this cap influenced their advice for clients considering moving out of New Jersey. However, 44% stated it did not affect their guidance.
Some respondents described the inability to use the full deduction as having a "net negative impact" on certain taxpayers. They argued that eliminating the cap would benefit those in high-tax states like New Jersey. One respondent remarked on how "homeownership is becoming further out of reach for your average income earner."
Higher-income earners often face the alternative minimum tax (AMT), which limits federal taxes regardless of deductions. Under TCJA regulations, fewer paid AMT compared to before. A participant observed that taxpayers within income brackets from 15% to 39.6% generally faced lower taxes than prior to the SALT cap.
Aiysha (AJ) Johnson, CEO and executive director at NJCPA said: “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.”
