Yesterday a financial advice column in NJ.com carried a Q&A from a guy who contemplated leaving New Jersey and moving to Florida because he could not deduct all of his state and local taxes. The post went methodically through all the pros and cons and associated calculations of the question posed. But it missed the main points in this line of thinking. That’s what inspired this post. I hope to pick up where that column left off.
First, financial planning always works out better when the goals are clearly stated. In this case, the goal is not simply to deduct SALT. That, in itself, is not a benefit. The financial goal is likely to reduce taxes, increase retained wealth, or both.
Second, New Jersey is one of the states that allows a workaround to allow the full tax benefit of deducting SALT. We call it “BAIT”. It’s not automatic nor even simple. Granted, it takes advance planning and is not straightforward; pay attention to the details to make it work.
Third, The article pointed out that we pay the highest taxes in the country here in New Jersey. But that’s not true of everyone in the state. There are plenty of New Jersey residents, investors, and even a few tax planners like me who pay little overall tax – at least no more than we would pay in another state. Again, it requires long term goals and takes disciplined planning.
Fourth, it makes more sense to consider the much larger picture. We could presume that a person who says they are willing to move from one state to another rather than tackle tax planning is likely a person with more issues than appear in this discussion. New Jersey and Florida present vastly different approaches to individual interaction with government. The T-shirt that greeted me yesterday in Key West “Sun’s Out, Guns Out” is unlikely to be something I’ll ever see in New Jersey. Suns New Jersey man does not have the same notoriety as his southern counterpart. Yet these southern marina owners have me drooling over opportunities that we will never enjoy at our New Jersey rural coast. I suppose we just can’t have it all.