A recent survey by the New Jersey Society of Certified Public Accountants (NJCPA) has revealed that 50% of CPAs saw their clients’ net tax bills increase due to the $10,000 cap on state and local tax (SALT) deductions.
This cap, imposed by the Tax Cuts and Jobs Act (TCJA) in 2017, is due to expire in 2025. It is seen to have impacted taxpayers, particularly those in higher income brackets.
The survey, which included responses from 325 CPAs, revealed that 30% of the respondents said their clients’ tax bills had not increased, while 20% were unsure.
It revealed that 65% of clients with net incomes between $150,000 and $324,999 experienced a rise in their tax bill, as did 64% of those earning between $325,000 and $999,999.
The survey was designed to assess the impact of the $10,000 SALT cap and gauge the opinions of CPAs on how this has affected their clients, particularly in high-tax states such as New Jersey.
Survey participants were asked about the minimum amount the cap should be raised to in order to provide tax relief for middle-class New Jersey families, excluding complete elimination of the cap.
In response, 37% suggested $30,000, 28% proposed $20,000, and only 22% believed $50,000 would be sufficient.
More than 55% of participants noted that the $10,000 SALT cap had influenced their advice to clients considering relocation out of New Jersey, with 44% stating it had no effect on their guidance.
Some respondents pointed out that the loss of full SALT deduction usage had created a “net negative impact” for certain taxpayers.
One respondent remarked, “Homeownership is becoming further out of reach for your average income earner.”
Others highlighted that higher-income earners are subject to the alternative minimum tax (AMT), which limits the percentage of taxes paid to the federal government, regardless of deductions.
Fewer taxpayers were subject to the AMT under the TCJA, leading to a reduction in tax liabilities for those in the 15% to 39.6% income brackets.
NJCPA CEO and executive director Aiysha (AJ) Johnson 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.”
