The Republican tax overhaul has been met with varying levels of acceptance. For some, the child tax credit and increase in the standard deduction is good news and will result in a hefty refund check come April 15, 2019. But for those who take a lot of itemized deductions and those in high-tax states, it has been a little more difficult to embrace. No matter what side you’re on, though, the bill has passed, and it’s up to everyone to deal with it the best way they can.
As a resident in a high-tax state, I know all too well how much the new tax bill is going to hurt. Since we won’t be able to deduct income and property taxes in excess of $10,000, my husband and I join millions of Americans in trying to find the silver lining. With property taxes far over the $10,000 mark, we have had to consider various opportunities. If you are in the same boat, I offer you some options.
If you have considered refinancing in the past, but haven’t pulled the trigger just yet, now might be the time. Before mortgage rates increase even more than they have, you could potentially lower your monthly “nut” if you refinance. While Adjustable Rate Mortgages (ARMs) aren’t for everyone, they can sometimes offer a few good years of relief. We have a 7-year ARM with an extremely low rate. Since we didn’t know if we would even still be in this house in seven years, we took the chance and will refinance before the end of the term. If you have a lot of equity in your home, refinancing might be a great way to lower those monthly bills, thereby saving for any hit you have to take from the tax overhaul.
2. Move to a low-tax state
This might not seem ideal, but it could be an option worth seriously considering. Think about this: If you’re in New Jersey, for example, you’re paying 6.36 percent in income tax, 6.875 percent in sales tax, and have property taxes somewhere between $10,000 and $30,000. If you move to a state like North Carolina, you’ll pay 5.75 percent in income tax, 4.75 percent in sales tax, and maybe $2,000 in property taxes. The move could save you upwards of $30,000 per year. That’s not an insignificant amount of money, and the move would pay itself off within the year.
3. Get another gig
If a complete job change isn’t a possibility, then the circumstances might necessitate a little side hustle to make up for what you’d be losing to Uncle Sam. If you want to continue to take the vacations to which you’ve grown accustomed, or save for retirement and college regularly, then maybe a little part-time work might be smart. Some people opt for multi-level marketing opportunities, like selling the face care products they already use and love, or the essential oils that everyone is crazy about these days. Others choose to do consulting—lending their expertise to businesses or individuals on a small scale. Are you a talented graphic designer? Small businesses might benefit from your help with logos or event invitations. Are you great with bookkeeping? Your skills are invaluable. See how you can pull in a few extra dollars to offset any loss you might experience.
4. Hope the charitable deduction change sticks
Several states are introducing legislation that would allow residents to deduct a large portion of their property taxes as charitable donations (since such deductions will remain under the new tax code). It is unclear if this loophole will ultimately pan out, but one can hope!
5) Do a LOT of yoga
If all else fails, take a lot of yoga classes and breeeeathe. You’re going to need to be as zen as possible as you sit with your accountant next year and take the hit.