SALT Deduction Limitation Question

3 Replies

Hi BP Community,

I have read 5 articles and am still unclear on the new $10k deduction limit on SALT. 

I am considering all tax implications before purchasing my first multi-family property.

I currently have about $150k in equity on a condo I will sell in the coming year. I would like to do a 1031 exchange and put 20% down on a multifamily property. 

I have a real estate LLC, but have not been able to title them under the LLC since all of my properties still have mortgages.

So, let's say I purchase a $650k multi family property with $15k in property taxes. Is their a way to avoid the additional $5k (beyond the $10k limit)? I don't think I will be able to get a mortgage in the LLC name since I do not show much positive income.

Thanks in advance!

@Bradley Chiakas

You did not mention if your condo or the multi-family property you plan to acquire will be your personal residence or an investment property.

If these are investment properties - the $10,000 SALT limitations does not apply and you can take them in full.
If the Multi-family you plan to acquire is partially personal residence/partially investment property(i am assuming that you won't be living in the whole thing) then you would take the SALT amounts that relate to the house that you plan to use as a personal residence.
Ex. if it is a duplex - the property taxes will assumed to be split $7500 and $7500
You will take $7500 as an potential itemized deduction(you would then add it with your other itemized deductions and compare it with your standard deduction)
The other 7500 will be taken as a deduction on your rental business.

Whether they are in your personal name or an LLC makes absolutely no differences.

All that matters is if it is an investment property or your personal residence. As long as it is an investment property there are zero SALT limitations. 

Thank you both. So, as long as it is not classified as a "first or second home," then I can take full SALT deductions.  

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