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San Francisco Chronicle
09-05-2025
- Business
- San Francisco Chronicle
Will Californians' taxes go down with Trump tax cuts? It could come down to one thing
Republican lawmakers are debating a tax policy that could have major implications for Californians. The Tax Cuts and Jobs Act of 2017, enacted during the first Trump administration, imposed a limit on how much of your state and local taxes could be deducted from your federal taxable income. The limit, referred to colloquially as the 'SALT cap,' was set at $10,000. It is set to expire at the end of the year, along with many other provisions of the 2017 Trump tax bill. But Republicans are preparing a new package of tax changes, and whether to raise or eliminate the SALT cap has been a major talking point. For more than a century, there was no limit on SALT deductions. The deduction was first added to the tax code in 1913 with the idea that people shouldn't be taxed twice on their income — and thus, you should be able to subtract what you've already paid in state and local income taxes, property taxes and personal property taxes from the amount on which you're being assessed for federal taxes. But after Trump took office in 2017, Republicans saw a new $10,000 cap as a much-needed source of tax revenue. It also happened to target states that didn't vote for Trump. The impact of the cap was disproportionately felt by higher-income people in coastal blue states, including California and New York. That's because to claim the SALT deduction rather than the standard deduction, taxpayers file an itemized return, and higher-income people are more likely to itemize their deductions. Also, wealthy blue states tend to have higher taxes because they offer more government services, and have higher home prices that command higher property taxes. (Though California's Prop 13 property tax increases for homeowners who stay put.) To compare: The median existing home-sale price in March was $403,700 nationally, $884,350 in California and a whopping $1.4 million in the Bay Area, according to data from the National Association of Realtors and its California branch. Richard Pon, a certified public accountant and certified financial planner based in San Francisco, said his clients were initially upset by the new limit on deducting state and local taxes. But the 2017 law also increased the income level at which the alternative minimum tax, or AMT, kicks in. Pon said many of his clients, most of whom make over $200,000 annually, were no longer subject to AMT under the changes, and so owed less as a result, helping offset the losses from the SALT cap. But politicians from both sides of the aisle representing California, New York and other affected states have been advocating to raise or eliminate the SALT cap. While campaigning last year, Trump courted New York voters with a post on Truth Social saying he would 'get SALT back.' The SALT cap led to an estimated 1 million California taxpayers owing $12 billion more annually, according to data from the state Franchise Tax Board cited by CalMatters in 2019. The majority of those taxpayers, 62%, made between $100,000 and $250,000 annually, the data showed. Funds raised by the newly imposed SALT cap helped offset other tax cuts in Trump's signature legislation: In addition to limiting the SALT deduction, the TCJA doubled the standard deduction, eliminated personal exemptions and a number of miscellaneous deductions, reduced the maximum mortgage interest deduction, doubled the maximum child tax credit to $2,000, created a $500 credit for older dependents and created a generous deduction for many pass-through entities not subject to corporate income tax, like businesses with sole proprietorships,. Almost all of its changes for individuals are set to expire at the end of this year, while nearly all of the corporate ones, including cutting the corporate tax rate from 35% to 21%, are permanent. Part of the debate in Congress right now comes down to whether the SALT cap will be lifted entirely, raised, or limited to certain income levels. Pon said another consideration would be pegging the amount to inflation — the $10,000 hasn't come up for discussion since 2018 — or removing the marriage penalty on the limit, since under the current tax code the cap is $10,000 for both single people and for married couples filing jointly. 'I don't see that there's a real interest from anybody, Republican or Democrat, in helping millionaires and billionaires,' said Rep. Nicole Malliotakis, R-N.Y., according to Politico. She proposed lifting the cap for people with household incomes 'under the $400,000-$500,000 range.' But others — so-called 'SALT Republicans' from predominantly blue states — say they want the SALT deduction limit completely eliminated. And on the other end of the spectrum, 32 Republicans from the House signed a letter saying they wouldn't support the new tax package unless there were $2 trillion in concrete spending cuts, and the bill must not add anything to the deficit, meaning raising or lifting the SALT cap would have to be offset by increased taxes or decreased spending elsewhere. So the future of the SALT cap is still up in the air. GOP leaders have been hoping to get a vote on the new tax package set for the House Ways and Means Committee this week. If you feel strongly about it, consider getting in touch with your elected representative to let them know. (You can look them up on the House ' Find Your Representative' webpage.)
Yahoo
04-04-2025
- Business
- Yahoo
Odds to win the Mega Millions jackpot improve next week, but come with these tax issues
The odds of winning an even bigger Mega Millions jackpot improve next week, but the tax consequences will remain just as complicated. On April 5, the price of a Mega Millions ticket is increasing to $5 from $2, only the game's second price adjustment since the first ticket was sold more than 20 years ago. Everyone's odds of winning a prize will improve (to 1:23 from 1:24 overall and to 1:290,472,336 from 1:302,575,350 for the jackpot) and prizes will be larger, Mega Millions said. Non-jackpot prizes will be 2X, 3X, 4X, 5X and now 10X larger than they are today, and jackpots will start at $50 million instead of $20 million, it said. The first drawing for the new Mega Millions is April 8. While Mega Millions may be 'new and improved,' the tax situation isn't, experts said. Since players have better odds of winning, they should know how winning could affect their finances. Here's a rundown. States vary in how they treat lottery winnings so you must know the rules where you live and where you bought the winning ticket. For example, 'California excludes lottery winnings, (but) the catch is that it must be sold from a California lottery retailer,' said Richard Pon, a certified public accountant in San Francisco. That means a California resident buying a Mega Millions ticket from another state will have to pay California tax since it wasn't sold by a California lottery retailer, he said. 'This is where a tax professional really comes in handy,' Mark Steber, chief tax officer at Jackson Hewitt, said. 'State taxes can be very tricky.' Lottery agencies generally withhold 24% of all winnings over $5,000 for taxes, but the highest federal tax bracket is 37%. Lottery winnings are taxed as ordinary income. Even if someone wins and chooses to receive regular annuity payments over 30 years and 'sells the future income stream to another party, the sale is not considered capital gains eligible for lower tax rates,' Pon said. 'So don't spend all your money at once since you likely will owe tax on the jackpot,' he said. More than 90% of lottery winners choose the lump sum over 30 annuity payments. Taxes will be higher if you receive a lump sum. Having income over 30 years will let you have income also taxed at the six lower tax brackets each year instead of primarily having your Jackpot taxed at 37% in one year, Pon said. There are seven tax brackets in 2025. Installments also potentially give you time to move to a state with no income tax in a future year thereby reducing your state tax to zero, he said. 'However, the true economics is that having your winnings now in a lump sum -- even if it's about 50% lower than the 30-year installment option -- can increase your wealth as you can invest the proceeds immediately,' Pon said. But if the Tax Cuts and Jobs Act expires at the end of the year, a lump sum could make sense. Six of the seven tax brackets will increase next year if the Act isn't extended. The highest bracket would rise to 39.6% from 37% this year. A lump sum would also protect your winnings from inflation, which would reduce the value of future payments, he said. Thanks to the Tax Cuts and Jobs Act, jackpot winners in 2025 could take advantage of the high lifetime estate and gift tax exemption and give away $13.99 million per person tax free. Unless the Tax Cuts and Jobs Act is extended, jackpot winners in 2026 and beyond will only be able to give away about half that amount tax free. Separately, winners this year can gift to as many people as they want $19,000, without eating into their lifetime estate and gift tax exemption. If you have any gambling losses and itemize your taxes, you can technically apply that against your winnings to lower the taxable amount of your jackpot, Pon said. However, he warns 'upon audit many people are not allowed this gambling loss deduction as it's hard to prove gambling losses without receipts. Even having losing tickets is not proof of payment as the IRS can argue you found the losing tickets.' Winning a huge jackpot is exciting and can change the course of someone's life, but it can also be overwhelming and complicated to handle financially. Financial professionals suggest winners assemble a an entire financial team before telling anyone to hash out a plan. Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday. This article originally appeared on USA TODAY: Winning Mega Millions will be easier, but not the taxes that follow Sign in to access your portfolio
USA Today
04-04-2025
- Business
- USA Today
Odds to win the Mega Millions jackpot improve next week, but come with these tax issues
Odds to win the Mega Millions jackpot improve next week, but come with these tax issues Show Caption Hide Caption Mega Millions: Big changes coming to lottery Officials with the lottery drawing say prices for a Mega Millions ticket will be going up, but they also say the tradeoff for the higher prices will be larger jackpots. Fox - 10 Phoenix The odds of winning an even bigger Mega Millions jackpot improves next week, but the tax consequences will remain just as complicated. On April 5, the price of a Mega Millions ticket is increasing to $5 from $2, only the game's second price adjustment since the first ticket was sold more than 20 years ago. Everyone's odds of winning a prize will improve (to 1:23 from 1:24 overall and to 1:290,472,336 from 1:302,575,350 for the jackpot) and prizes will be larger, Mega Millions said. Non-jackpot prizes will be 2X, 3X, 4X, 5X and now 10X larger than they are today, and jackpots will start at $50 million instead of $20 million, it said. The first drawing for the new Mega Millions is April 8. While Mega Millions may be 'new and improved,' the tax situation isn't, experts said. Since players have better odds of winning, they should know how winning could affect their finances. Here's a rundown. No standard among states States vary in how they treat lottery winnings so you must know the rules where you live and where you bought the winning ticket. For example, 'California excludes lottery winnings, (but) the catch is that it must be sold from a California lottery retailer,' said Richard Pon, a certified public accountant in San Francisco. That means a California resident buying a Mega Millions ticket from another state will have to pay California tax since it wasn't sold by a California lottery retailer, he said. 'This is where a tax professional really comes in handy,' Mark Steber, chief tax officer at Jackson Hewitt, said. 'State taxes can be very tricky.' Be prepared to pay federal tax on big wins Lottery agencies generally withhold 24% of all winnings over $5,000 for taxes, but the highest federal tax bracket is 37%. Lottery winnings are taxed as ordinary income. Even if someone wins and chooses to receive regular annuity payments over 30 years and 'sells the future income stream to another party, the sale is not considered capital gains eligible for lower tax rates,' Pon said. 'So don't spend all your money at once since you likely will owe tax on the jackpot,' he said. Lump sum payment vs annuity and taxes More than 90% of lottery winners choose the lump sum over 30 annuity payments. Taxes will be higher if you receive a lump sum. Having income over 30 years will let you have income also taxed at the six lower tax brackets each year instead of primarily having your Jackpot taxed at 37% in one year, Pon said. There are seven tax brackets in 2025. Installments also potentially give you time to move to a state with no income tax in a future year thereby reducing your state tax to zero, he said. 'However, the true economics is that having your winnings now in a lump sum -- even if it's about 50% lower than the 30-year installment option -- can increase your wealth as you can invest the proceeds immediately,' Pon said. But if the Tax Cuts and Jobs Act expires at the end of the year, a lump sum could make sense. Six of the seven tax brackets will increase next year if the Act isn't extended. The highest bracket would rise to 39.6% from 37% this year. A lump sum would also protect your winnings from inflation, which would reduce the value of future payments, he said. Other tax tidbits that could cut your bill Thanks to the Tax Cuts and Jobs Act, jackpot winners in 2025 could take advantage of the high lifetime estate and gift tax exemption and give away $13.99 million per person tax free. Unless the Tax Cuts and Jobs Act is extended, jackpot winners in 2026 and beyond will only be able to give away about half that amount tax free. Separately, winners this year can gift to as many people as they want $19,000, without eating into their lifetime estate and gift tax exemption. If you have any gambling losses and itemize your taxes, you can technically apply that against your winnings to lower the taxable amount of your jackpot, Pon said. However, he warns 'upon audit many people are not allowed this gambling loss deduction as it's hard to prove gambling losses without receipts. Even having losing tickets is not proof of payment as the IRS can argue you found the losing tickets.' Winning a huge jackpot is exciting and can change the course of someone's life, but it can also be overwhelming and complicated to handle financially. Financial professionals suggest winners assemble a an entire financial team before telling anyone to hash out a plan. Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
Yahoo
04-04-2025
- Business
- Yahoo
Odds to win the Mega Millions jackpot improve next week, but come with these tax issues
The odds of winning an even bigger Mega Millions jackpot improves next week, but the tax consequences will remain just as complicated. On April 5, the price of a Mega Millions ticket is increasing to $5 from $2, only the game's second price adjustment since the first ticket was sold more than 20 years ago. Everyone's odds of winning a prize will improve (to 1:23 from 1:24 overall and to 1:290,472,336 from 1:302,575,350 for the jackpot) and prizes will be larger, Mega Millions said. Non-jackpot prizes will be 2X, 3X, 4X, 5X and now 10X larger than they are today, and jackpots will start at $50 million instead of $20 million, it said. The first drawing for the new Mega Millions is April 8. While Mega Millions may be 'new and improved,' the tax situation isn't, experts said. Since players have better odds of winning, they should know how winning could affect their finances. Here's a rundown. States vary in how they treat lottery winnings so you must know the rules where you live and where you bought the winning ticket. For example, 'California excludes lottery winnings, (but) the catch is that it must be sold from a California lottery retailer,' said Richard Pon, a certified public accountant in San Francisco. That means a California resident buying a Mega Millions ticket from another state will have to pay California tax since it wasn't sold by a California lottery retailer, he said. 'This is where a tax professional really comes in handy,' Mark Steber, chief tax officer at Jackson Hewitt, said. 'State taxes can be very tricky.' Lottery agencies generally withhold 24% of all winnings over $5,000 for taxes, but the highest federal tax bracket is 37%. Lottery winnings are taxed as ordinary income. Even if someone wins and chooses to receive regular annuity payments over 30 years and 'sells the future income stream to another party, the sale is not considered capital gains eligible for lower tax rates,' Pon said. 'So don't spend all your money at once since you likely will owe tax on the jackpot,' he said. More than 90% of lottery winners choose the lump sum over 30 annuity payments. Taxes will be higher if you receive a lump sum. Having income over 30 years will let you have income also taxed at the six lower tax brackets each year instead of primarily having your Jackpot taxed at 37% in one year, Pon said. There are seven tax brackets in 2025. Installments also potentially give you time to move to a state with no income tax in a future year thereby reducing your state tax to zero, he said. 'However, the true economics is that having your winnings now in a lump sum -- even if it's about 50% lower than the 30-year installment option -- can increase your wealth as you can invest the proceeds immediately,' Pon said. But if the Tax Cuts and Jobs Act expires at the end of the year, a lump sum could make sense. Six of the seven tax brackets will increase next year if the Act isn't extended. The highest bracket would rise to 39.6% from 37% this year. A lump sum would also protect your winnings from inflation, which would reduce the value of future payments, he said. Thanks to the Tax Cuts and Jobs Act, jackpot winners in 2025 could take advantage of the high lifetime estate and gift tax exemption and give away $13.99 million per person tax free. Unless the Tax Cuts and Jobs Act is extended, jackpot winners in 2026 and beyond will only be able to give away about half that amount tax free. Separately, winners this year can gift to as many people as they want $19,000, without eating into their lifetime estate and gift tax exemption. If you have any gambling losses and itemize your taxes, you can technically apply that against your winnings to lower the taxable amount of your jackpot, Pon said. However, he warns 'upon audit many people are not allowed this gambling loss deduction as it's hard to prove gambling losses without receipts. Even having losing tickets is not proof of payment as the IRS can argue you found the losing tickets.' Winning a huge jackpot is exciting and can change the course of someone's life, but it can also be overwhelming and complicated to handle financially. Financial professionals suggest winners assemble a an entire financial team before telling anyone to hash out a plan. Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning. Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@ and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday. This article originally appeared on USA TODAY: Winning Mega Millions will be easier, but not the taxes that follow Sign in to access your portfolio
Yahoo
05-03-2025
- Business
- Yahoo
Where is my state tax refund? Here's how to check your Wisconsin state refund status
If you've already filed your state and federal taxes in Wisconsin, you're probably wondering when you'll get your refund — especially with potential delays from Internal Revenue Service layoffs. Here's what to know about refund timelines and how to check the status of yours: If you filed state taxes electronically in Wisconsin, then you should receive your refund in less than 12 weeks, according to the Wisconsin Department of Revenue. Paper tax returns, meanwhile, can take longer to process. The DOR says its safeguards against fraud and errors could delay paper refunds for up to 12 weeks. You can check the status of your Wisconsin state tax refund online on the state's portal. Similarly, most federal refunds are issued within three weeks of electronic filing, according to the IRS. Refunds can take anywhere from six to eight weeks from the date the IRS gets a paper return. You can check your federal tax refund online using the IRS' "Where's My Refund?" tool. Employees affected by layoffs will reportedly be new hires and those in lower-level positions, though it remains unclear if such cuts will impact the processing of tax returns and refunds. Despite the uncertainty, experts are urging taxpayers to file returns early to avoid potential delays. Certified public accountant Richard Pon told USA TODAY in mid-February complications that could arise from staffing reductions include understaffed processing centers and longer processing times for correspondence and amended returns. More: Could IRS layoffs delay tax refunds for Wisconsinites? This article originally appeared on Milwaukee Journal Sentinel: When will I get my Wisconsin state tax refund?
