xml:space="preserve">
xml:space="preserve">
Advertisement
Advertisement

New itemization rules hurting taxpayers

Republican presidential front-runner Donald Trump is calling for an overhaul of the US tax code that would eliminate income taxes for millions of Americans, and lower them for the rich. Sept. 28, 2015. (AP)

As a Catonsville tax preparer for a number of lower-to-upper middle class taxpayers, I have seen first hand that it is clear that the new tax law has not been kind (“As Marylanders do their taxes, many are asking: Why'd I get such a big tax hike?” Feb. 15)

Two months into the season, most taxpayers are seeing reduced refunds or even paying additional taxes for the first time. While this is in part due to the reduction in tax withholding implemented at the time of the law’s passage, it is more significantly related to taxpayers not being able to itemize deductions because of the elimination of deductions for work expenses and limitations on the deductibility of state, local and real estate taxes. As a result, fewer families can itemize and their taxes, as a result, have risen. Combined with fewer dollars withheld, the results are predictable.

Advertisement

What is more painful is the unintended, or perhaps merely unadvertised impact on state taxes. State coffers are being fattened by the rule that you can only itemize on the state return if you itemize on the federal return. Thousands of deductible dollars have been lost as taxpayers are no longer able to itemize on their state returns. The impact of not itemizing on state returns is more significant since the state standard deduction is much lower. This results in, sadly and unfairly, a back-door tax that the state legislature did not even have to pass. In some cases clients are sacrificing federal refund dollars by itemizing on their federal return in order to be able to itemize on the state return because the difference on the state return is greater. So, taxpayers must pay more taxes on the federal return to get a greater refund on the state return or pay less taxes on the federal return and sacrifice more tax dollars to the state, a Sophie’s choice that could have been avoided had the state changed its law and allowed federal non-itemizers to itemize on the state.

This is an unfair dilemma that was predictable but poorly communicated by federal and state governments. It has blind-sided many taxpayers.

Advertisement
Advertisement

Robert Dubansky, Pikesville

Recommended on Baltimore Sun

Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement