Maryland tax planning

[kathyc2]

I'm seeing MD did not change their laws as to either taking the federal itemized or 4,500 (MFJ) if federal not itemized. They also then add back on the MD return the state/local taxes deducted on Federal A.

The client I'm working on will have about 11K in state/local taxes and 5K in real estate taxes. Does anyone know how the state addback will be handled with the new 10K limit on federal? Will the full 11K still be an addback for MD, or will it be some pro-ration of the amount actually allowed as a deduction on A?

[MDEA]

I believe that the only $5000 will be added back. When you enter on schedule A you will only put $5000. My clients that have real estate tax of over $10000 will not deduct any state income tax.

[kathyc2]

That would be the logical way to do it. I didn't see anything on their web site if that will actually be the way it's handled.

I only do a couple MD return for family member clients who moved there. They are at a 7.75% state/local rate. If they take the MD standard of 4,500 their state reduction of tax will be 349. As is, their A total would be 23K. However, if they make an additional 1K charity donation to put them over the federal standard the MD reduction of tax would be 1,472 (19,000 net time 7.75%). So, making a charitable donation of 1,000 will save them 1,124 in tax. Crazy!