We all know the Tax Cut and Jobs Act (TCJA) passed late last year was supposed to be a huge tax break for almost everyone. While it’s true that most people will see a boost in their paychecks, not everyone will be so lucky. There are some individuals and families that will actually owe more.
In fact, according to a recent report, approximately one million California residents will owe $12 billion more in taxes collectively next year. So what makes these earners so unlucky? Well, it has to do with the change in the state and local tax deduction rates.
Previously, these taxpayers were able to deduct the full amount of their state and local taxes from their federal return. However, the TCJA put a cap on how much individuals can earn and still claim this deduction. Therefore, individuals with incomes of $1 million a year or more will pay nearly $9 billion extra.
Additionally, about 750,000 families in California that make less than $250,000 annually will also owe more taxes. Combined, they these individuals will pay close to another $1.1 billion more in taxes.
Most taxpayers in the state will see a tax cut, but for high net income taxpayers, the Tax Cut and Job Acts is anything but a tax cut.