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Abstract
[...]approximately 10% of taxpayers reported a deduction for real estate taxes. Because of the $10,000 limitation on the SALT deduction, the percentage of taxpayers receiving a tax benefit from deducting real estate taxes in 2018 was probably less than 10%. [...]a taxpayer may have reported $12,000 in state income taxes and $7,000 in real estate taxes. Because of the $10,000 limitation, reporting the real estate taxes as a deduction saved the taxpayer no additional income taxes. For 2020, the home is rented out for 160 days and the taxpayer uses the home for 40 days. Since the days used personally of 40 days is more than 16 days (greater of14 days or 10% of 160 rental days), the vacation home is considered a qualified residence. The debt resulting from the refinancing was $975,000. Since the original debt of $950,000 was incurred before December 15, 2017, the $1,000,000 pre-TCJA limit on acquisition indebtedness applies; however, since the $975,000 in debt resulting from the refinancing exceeds the balance remaining on the original debt of $900,000, only the interest on $900,000 will be deductible.
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1 TIM KRUMWIEDE, Ph.D., CPA is a Professor of Accounting at Bryant University who has taught continuing education courses on Accounting for Income Taxes.
2 DAVID J. BEAUSEJOUR, J.D., MST, is a Professor in the Accounting Department at Bryant University.
3 JULIA SHEEHAN is a Graduate of Bryant University Masters in Professional Accountancy Program.
