While lawmakers are battling over the imposed $10,000 cap on state and local tax deduction, more and more frustrated taxpayers are bailing out of the state.
Experts said they were receiving calls every week from people in their state like New York and New Jersey, who were interested in relocating to other states to get away from these taxes.
Corrie, the head of the state and local tax group Friedman LLP, told FOX Business he received several inquiries every week regarding a change of residency from these states to states with no income tax or much lower tax rates.
Corrie’s accounting firm is headquartered in New York City. Due to the fact that individuals are unable to deduct their state and local income taxes on their federal returns, under the new tax law, moving somewhere else is becoming more attractive to these people. Corrie’s question is how willing are people of means to change their lifestyles to accommodate a financial plan?
He said a lot of the people coming to speak with him are high net worth people who are about to become engaged in a transaction such as the sale of a business or real estate located outside of New York. He knows that businesses or properties are usually held in an LLC and the sale is picked up on an individual’s personal income tax return in their home state.
Geoffrey Weinstein is special counsel in the Tax, Trusts & Estates Department of Cole Schotz. He told FOX Business he receives direct calls at least twice a week. He has offices in both New Jersey and Florida.
Too Many Changes
During this past year’s tax season, people were in total meltdown trying to figure out how the changes to the tax code were affecting them. He said he receives up to four calls a week from those who want information about changing their residence to another state. Most of the people who contact him are with pass-through businesses in New York and New Jersey.
FOX Business believes there could be another rush of frustrated taxpayers looking to flee these higher-tax states as the extended tax deadline approaches this fall.
Also, the Treasury Department recently issued guidelines disallowing a workaround high-tax state, like New York, who were hoping to use it to limit the impact of the $10,000 SALT cap on residents. This is another reason that could cause more people to move.
The $10,000 cap is below the average amount claimed by people in states like New York, New Jersey, and California. The average deduction claimed in California is $22,000, according to Kevin de Leon, a Democrat member of the Senate in California.
While Florida received more movers than any other state last year, according to the Census Bureau, New York’s outflow to Florida were the highest at 63,772 people. New York had the third-highest outflow of any state with 452,580 people moving out over the past year.
California had the highest outflow of domestic residents with the majority of the people moving to Texas, California, and Washington.
