The New $10,000 SALT Deduction Cap Is Hitting Westchester Homeowners Hard
Did your tax refund shrink this year? You’re not alone.
Like many Americans when tax time rolls around, David Filipiak had big plans for his refund. He and his husband, Rex Kelly, wanted to use their refunds to make some much-needed renovations to their Peekskill home. But those plans quickly came to a halt.
When the couple filed their taxes earlier this year, they realized that while neither of their respective incomes had increased, their federal taxes had shot up 12 percent.
“Everything has been the same, year-over-year, except one variable: the cap on state and local tax deductions,” Filipiak says, “and now, we owe thousands more in federal taxes.”
As part of the 2017 Tax Cuts and Jobs Act, a new $10,000 cap was set for all state and local taxes (SALT), a deduction that was previously unlimited. That cap has a notable impact on higher-tax regions, like Westchester County, where the average annual property tax tops $17,000.
“For people living in high-tax areas like Westchester, the loss of the SALT deduction is a big deal, while it may not be as big of a deal in other places,” says Eastchester resident Beth Hoffman.
The appeal of a smaller tax bill is part of what drew Filipiak and Kelly to Peekskill, where property taxes are generally lower compared to other parts of the county. “Part of the calculation in determining if we could afford [our home] was the SALT tax deduction we were able to take for owning this home,” he says, adding that without that deduction, “it’s like adding several hundred dollars a month to our housing costs.”
Filipiak isn’t alone. Many homeowners across Westchester are starting to feel the pinch of the recent changes. According to a report from the US Treasury Department, 10.9 million taxpayers will be impacted by the deduction cap. The report also noted those filers will be prevented from deducting $323 billion in their 2018 returns.
Chris Boyer, an enrolled agent at Keith Boyer CPA LLC in Tarrytown, pointed to one of his clients, a married couple who each bring in around $100,000 a year. “Their taxes went up about $5,000 with other considerations,” he says. “The loss of that deduction hurt them.”
For others, though, the year-over-year differences have been less dramatic.
“As for my personal impact, it looks okay to me,” says Jerry Gershner, an Ossining resident who estimates his real estate tax bill to be around $13,000.
“For people living in high-tax areas like Westchester, the loss of the SALT deduction is a big deal, while it may not be as big of a deal in other places.”
—Eastchester resident Beth Hoffman
Aside from the effects on the pockets of local taxpayers, the cap could have an even broader impact on the county’s housing market. “As an industry, there is a lot of talk regarding the impact of the tax cap,” says Marcene Hedayati, a broker/owner with William Raveis Legends Realty Group LLC in Tarrytown. The sellers who are most concerned about the recent changes, she adds, are those in the luxury market, where annual taxes can be more than $50,000.
“There are sellers who’ve been thinking about selling for other reasons,” says Gail Fattizzi, a broker and executive director of Westchester Real Estate, Inc. “The changes in the tax law may be one of the factors that now contributes to their ultimate decision to sell, but it won’t be the only reason.”
The tax overhaul could sway buyers, too. Hoffman and her family recently purchased their home in Eastchester, a decision they made before they were aware of the tax plan.
“We might have looked for something different had the tax situation been what it is now,” says Hoffman.
As for the long-term impact of the tax law changes, many believe that it’s just too early to tell. “I’ll leave that answer to the crystal ball,” says Gershner, who is president of Gershner Realty Services in Ossining.
Fattizzi agrees. “I don’t think we’ve seen any definitive impact yet. It’s still too early to say,” she says. “Once homeowners have filed their 2018 taxes, we may feel some waves.”
The market did see a slowdown at the end of 2018, Fattizzi says, but it’s not yet clear whether that was a result of the tax overhaul.
“I do think that Connecticut or other surrounding areas with lower property taxes could reap some benefit going forward if taxpayers see a major impact from the tax law changes,” Fattizzi says. “We’ll need some time to see if that will be the case.”
Jim Bryan, an economics professor at Manhattanville College, notes that last year, home prices fell most in Westchester municipalities like Scarsdale and Harrison, where median home values are highest. Meanwhile, in cities like Mount Vernon and Peekskill, growth rates were in the 16-to-17-percent range. “High-end homes in cities having high property-tax rates have been the hardest hit,” he says. “Cities with lower tax rates and more modest prices are enjoying an increase in the demand for their homes, both within Westchester and in neighboring counties.”
In Washington, some lawmakers from higher-taxed states, like New Jersey, New York, and California, are pushing back against the SALT cap. Earlier this year, Congresswoman Nita Lowey reintroduced a bill that would fully restore the deduction. “Repealing the SALT deduction was a callous move designed to target New York taxpayers, who are taxed enough as is,” Lowey says. “Our bill ensures that New York families see tax relief, not more tax burdens.”
Despite what comes of that bill, CPA Boyer advises taxpayers to be hyperaware of any modifications to the tax plan and be ready to adapt.
“We’re finding a lot of people didn’t adjust their withholdings. They saw an increase in their paycheck and thought, This is great!, and now they’re facing reality,” he says. “When something changes, you have to change with it.”
Aleesia Forni is a freelance writer and photographer based in Westchester County.