How exactly does the SALT deduction work? If I have to pay 1,000,000 in federal income taxes and 100k in state taxes, would my total income tax be 1m (900k to the fed + 100k to the state?), or would it be like a deduction where I write off my state income taxes against my total income and that 100k isn't taxed at the federal level? Thanks Mr. CPA.
The SALT deduction is an itemized deduction. State and Local Taxes along with mortgage interest and charitable donations are the most utilized itemized deductions. To the extent itemized deductions exceed your standard deduction, then the SALT deduction will reduce your federal income taxes.
Let's assume your federal income tax is $ 1,000,000 before SALT, and your SALT is $ 100,000 (using your numbers). Your federal income taxes would be reduce by $ 100,000 x your marginal tax bracket. For the sake of conversation, if you're in the 25% bracket, you save $ 25,000. Your federal; tax liability is reduced to $ 975,0000
Let's assume your federal income tax is $ 1,000,000 before SALT, and your SALT is $ 100,000 (using your numbers). Your federal income taxes would be reduce by $ 100,000 x your marginal tax bracket. For the sake of conversation, if you're in the 25% bracket, you save $ 25,000. Your federal; tax liability is reduced to $ 975,0000
