New York’s SALT Avoidance Scheme Could Actually Raise Your Taxes

Over the weekend, New York became the first state to create a state and local tax (SALT) deduction cap workaround—two workarounds, in fact, since New York does nothing on a small scale. Yet while the newly adopted budget encourages high-income taxpayers to take advantage of these provisions, they ought to come with a warning. Taxpayer Beware: these avoidance schemes may increase your total tax liability. They might even get you audited. New York’s effort to preserve what amounts to a federal subsidy for high-income earners in a high-tax state comes in two flavors: a voluntary payroll tax and a contribution in lieu of taxes scheme. The first is an administrative nightmare that is only likely to benefit a select few; the second is a legally suspect workaround which actually increases New York tax payments while holding out the dubious hope of federal tax savings by pulling one over on the Internal Revenue Service (IRS). We have explored these proposals, and their…

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