MINNEAPOLIS (WCCO) — President Trump celebrated Congress passing into law a major overhaul of America’s tax system.
It’s the biggest change to the tax code in decades.
It will take a few weeks for the average Minnesota worker to feel the effects of the tax bill.
By February 2018: lower tax brackets kick in, and middle income workers will see a bump up on their weekly pay checks.
On 2019 tax forms: families can deduct up to $24,000 for dependents, double the standard deduction today.
But for many Minnesota taxpayers, this tax bill is fraught with uncertainty.
That’s because Minnesota will lose an important tax benefit called SALT: State and local tax deductions.
Losing most of that deduction means a tax hike for thousands of Minnesotans.
Here is what you need to know.
Until now, there was no limit on how much state and local taxes you can deduct from your federal taxes.
Starting next year: those deductions are capped at $10,000. And that’s a big deal.
According to the IRS, in 2015: 881,740 Minnesota taxpayers claimed that deduction for state and local taxes.
That’s nearly 30 percent of all the taxpayers in the state.
The average deduction: $14,556.
And it’s widely popular, from north to south.
According to the National Association of Counties: In far north Roseau County, Minnesota, workers have good jobs making Polaris recreational vehicles, and deduct an average of $17,896.
Here’s a sample of other Minnesota Counties:
- Hennepin County: $19,454
- Crow Wing: $11,317.
- Washington County: $15,454.
- All the way to southern Olmsted County: $13,577
Without that deduction, those tax bills are likely to rise.
According to the Tax Policy Center: 80 percent of Americans will get a tax cut next year, especially high income.
But many of those tax cuts go away in seven years.
By 2027, 53 percent of taxpayers will see a tax hike.
That’s Reality Check.
Here are some of the sources we used for this Reality Check:
Effects of Tax Bill/State & Local Tax Deduction
CBS Money Watch: Winner & Losers in Tax bill
Tax Policy Center: Distributional Analysis of Tax Bill
IRS: State Tax Dsitribution
National Association of Counties US Map
MN House Research: Minnesota Itemized & Standard Deductions
Rockefeller Institute of Government: New York Balance of Payments w Federal Govt
CBS News: Tax Bill Winners and Losers
City of Roseau
USA Today: How Soon Will Effect of Tax Bill show Up?