A married couple filing jointly paid the following taxes in the current year: State income tax $8,000; Real estate tax on primary home $5,000; Personal property tax on cars $1,000. What is their itemized deduction for taxes (SALT)?

Answer options:

$14,000

$5,000

$10,000

$13,000

How to approach this question

Sum all eligible state/local taxes ($8k + $5k + $1k = $14k). Apply the hard cap of $10,000.

Full Answer

C.$10,000✓ Correct

Under the TCJA, the itemized deduction for State and Local Taxes (SALT) is limited to $10,000 per year ($5,000 if MFS). Total taxes paid = $14,000. Deduction is capped at $10,000.

Common mistakes

Forgetting the $10,000 cap.

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