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SALT Tax Deduction for Florida Taxes

 

Content provided for general information. Talk to your advisor to learn about recent updates or other rules that may apply to your situation.

If you live in Florida, you can still claim the state and local taxes deduction. Here’s how it works.

What is the SALT tax deduction?

The SALT tax deduction is a federal itemized deduction. It lets you deduct up to $10,000 in state and local taxes for federal income tax purposes.

Since the SALT deduction is an itemized deduction, it only makes sense to claim it if your itemized deductions add up to more than the standard deduction. For Florida residents, that might be when you

  • Have a very high Florida property tax bill
  • Have income that’s subject to income taxes in another state
  • Have other itemized deductions such as medical expenses, charitable contributions, mortgage interest, or student loan interest

You don’t have to claim the SALT deduction or itemized deductions every year. You can switch back and forth with the standard deduction depending on which is bigger in any given year.

How does the SALT deduction cap work?

The maximum deduction you can claim for state and local tax is $10,000. That’s all your local taxes paid added together not per state or type of tax.

If you paid more than $10,000 in state and local taxes during the year, you can only deduct $10,000. And of course, if you paid less than $10,000, you can only deduct the amount you actually paid.

What state and local taxes can you deduct?

The State and Local Tax deduction gives you a choice.

First, you can deduct either state and local income taxes or sales taxes. You can choose whichever one is bigger.

Next, you can deduct your property taxes paid during the year.

To summarize

  • Income Taxes + Property Taxes = Yes
  • Sales Taxes + Property Taxes = Yes
  • Income Taxes + Sales Taxes = No

Income Tax Deduction

Income taxes that are eligible for the SALT tax deduction include state income taxes, city income taxes, and county income taxes. Obviously, Florida has no state or local income taxes, but you may have paid taxes to another state.

Reasons Florida residents may have to pay taxes to another state include:

  • You just moved to Florida and have to file a final state income tax return in your old state
  • You did work in another state (even on a temporary work trip)
  • You own a business or rental property in another state
  • You’re a part-time resident of another state
  • Florida is your second home and you’re a primary resident of another state (that state can usually tax all of your income)

If you’re self-employed or a business owner, you may have heard of other states creating pass-through entity taxes. This is a tax loophole where the state waives personal income taxes on business income and then charges business income taxes at the same rate. By turning the taxes into business income, the $10,000 SALT deduction cap doesn’t apply.

Florida doesn’t have a pass-through entity tax because it generally only charges income tax on C-corporations.

Sales Tax Deduction

Florida sales tax starts at 6% statewide, and many counties add another 0.5% to 2% on top of that. The sales tax applies to almost everything except groceries, so there’s practically no avoiding paying sales taxes if you live in Florida.

The IRS gives you two options for deducting your sales tax.

First, you can save every receipt during the year and claim the actual sales taxes that you paid. Don’t forget to subtract any refunds.

Most people aren’t going to save every receipt including small lunches, topping off their gas tank, and other everyday purchases.

The other option is to use the IRS online sales tax calculator. This calculator lets you deduct a standard amount of sales tax based on your income and filing status.

If you use the calculator method, you’re also generally allowed to add the sales tax you paid for a car, boat, plane, and major home renovation projects.

Other large purchases are covered by the calculator. So if you paid a lot of sales tax on electronics or other large purchases, you might want to save at least those receipts and see if that gives you a bigger deduction than the calculator.

Note: This deduction doesn’t apply to business purchases, but you can usually include the sales tax in your business expenses.

Property Tax Deduction

You can also deduct the property taxes on your home. You generally can’t write off real estate taxes for a business property as a personal itemized deduction, but those taxes are likely a business expense.

In order to be deductible, the tax generally has to be ad valorem or based on the value of your property. 

Many Florida property tax bills contain fixed, non-ad valorem assessments for things like fire districts, school districts, and water districts. Those charges are generally not deductible.

Note: While some mortgage providers give you a statement of property taxes paid, they aren’t required to include this information on your Form 1098 or other tax forms. You may need to obtain your property tax history from your county tax collector.

Florida doesn’t have an individual personal property tax on cars or other personal property. Business personal property taxes generally don’t fall under the SALT tax deduction.

Should I move to Florida if I’m over the maximum SALT deduction?

People living in high-tax jurisdictions who pay more than $10,000 in state and local taxes often think about moving to Florida. While the SALT deduction cap still applies in Florida, not having an income tax they can’t deduct is attractive.

Depending on your income and job portability, you may be able to save money by moving to Florida. However, the major cities in Florida are rapidly becoming some of the highest cost of living areas in the country, and Florida home and auto insurance rates are also much higher than most other places.

So you really need to look at a lot more factors beyond taxes. In addition, the $10,000 SALT cap is currently set to expire after 2025 if Congress takes no action. If the cap expires, you’ll once again be able to deduct unlimited state and local taxes.