Last updated on June 23rd, 2021 at 08:10 pm

Last Updated on June 23, 2021 by

By now, you have filed two years of tax returns and if you live in a high-cost site such as CA, TX, and others, you know you paid more in taxes. If you live in Mississippi or would have lived in Mississippi, you probably saw a benefit in the tax law.

Basically, the $10,000 tax deduction for all government taxes which includes sales, property, income, and other taxes was not sufficient in a high tax state but in Mississippi where our taxes are lower, you may not have used the full $10,000. In fact, you probably filed a return using the standard deduction.

Most Americans actually filed returns using the standard deduction because it was significantly increased and then again if you were over 65. Most Mississippi residents would have done better under the new tax law.

Some other issues come up with the new tax law that has not affected the majority of Mississippi residents and that is the exclusion of income from the sale of a home. The law permits the first $500,000 of profit from the sale of a personal primary residence for married couples.

Given the value of Mississippi property where the median price along the Gulf Coast is under $200,000, you can see that while people may have made money on the sale of their principal home, it did not exceed the maximum allowed for deductions.

If you lived in CA and sold your home for $800,000 when you purchased the property years ago for $150,000, you could only keep $500,000 tax-free and would have to pay income taxes on the $150,000 over the $500,000 limit. Under the old law, they would have been able to keep it all without paying taxes.

A larger number of people in high-cost states were taking out equity loans because of large equity gains in their property over time. Those loans were tax-deductible before 2018 but not now. Regardless of when you obtained that loan, it is no longer a tax deduction.

MS income tax is lower than in many high-cost states. For example, you can pay as much as 12.3% in CA state income tax. The maximum in MS is 5% and most people do not pay that. Before the 2017 tax law change, high-cost state residents could deduct an unlimited amount of taxes. Not now. The $10,000 limit applies to all types of taxes.

Residents of IL, CA, NY, and several other states have been migrating out of those high-cost states in part due to what has become an increase in income taxes as a result of changes that went into effect in 2018. Some states such as CA have raised their state income tax cap from 9% to the current 12.3%. So not only has the federal tax law changes hit some people hard, the additional taxes being levied by some states have exacerbated the situation.

If you are working and you make lots of money you can throw away, stay where you are, and pay the additional taxes or lose the deductions (same result). Now consider living on a fixed income when you are retired. See what I mean. We all want stability in our tax system. The tax law change did improve life for the middle class in most states because not only did they pay less in taxes, they were not capped out on tax deductions.

For those who are not living in Mississippi, you may want to speak to your CPA about opportunities to move to the Mississippi Gulf Coast and determine how much you will save in taxes and mortgage payments. Many people in CA must use jumbo loans to buy a home. A small percentage of homes along the Mississippi Gulf Coast require jumbo loans. Another way to save money moving to the Mississippi Gulf Coast, you can obtain a conventional, FHA, or VA loan which is offered at interest rates lower than non-conforming or jumbo loans used in many high-cost states.

If you live here along the Mississippi Gulf Coast as we do, you should be pleased with the outcome of the tax changes. We have benefited and frankly, I feel sorry for people living elsewhere who are not aware of how beautiful and cost-effective it is to live in our little bit of paradise.