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Bergen Bar Tax Bulletin: Volume 37, No.9

Current Items:                                                                   

    1. Oh, My New Jersey
    2. No Dough, Joe
    3. SALT in Your Diet?
    4. Liking the Like Kind Exchange?
    5. RMD Up…Again?
    6. Maryland, My Maryland

1). I am a Jersey boy. So were my parents for that matter. And when my grandparents got off the boat from Palermo they became Jersey folks as well. So I feel especially qualified to let you in on the fact that New Jersey has been recently named the absolute, without a doubt, beyond all competition, worst tax friendly state for anybody thinking of retiring. Now before you go packing your bags heading off somewhere else I suggest you watch Wayne’s World again and see what Mike Myers does to that state which has the honor of being one of the most tax friendly states… Delaware. Now I know I’m going to get some emails and maybe some long hand letters from some of my colleagues who have ventured down to the blue hen state but really… Delaware? Just so you know Delaware is flat as a pancake and most every place you go you will find roads plastered with signs that say Flood Zone. But we’re talking about taxes here not convenience. Delaware took the prize because it has low property taxes and no sales or estate taxes. The other members of the top 10 list include Arizona, Colorado, Nevada, South Carolina, Tennessee, Wyoming and Arkansas. You should note that a number of those states are BYOW (bring your own water). New Jersey got thumbs down because it has the highest median property tax rate in the country. And among the other worse contenders are Connecticut, New York, Iowa, Kansas, Nebraska, Texas, Vermont and Wisconsin. All of these are believed to the have the highest tax burden for retirees. It’s not enough to pick a state based upon its tax structure but maybe it is worth noting that three states Pennsylvania, Mississippi and Illinois completely exempt retirement income from taxation for most seniors. Heck, Pa is just a hop, skip and a short jump from NJ.

2) Some things are clear. Send a budget dollar to the Internal Revenue Service and they will send you back three. It really is that simple. The current hole in tax collection would allow a convoy of 18 wheelers to pass through unnoticed .So some time ago I reported that the Biden administration was hoping to get some mega dollars to the IRS in an attempt to collect the taxes due to pay for the infrastructure mess we are living in as well as perhaps clean air and water. But for the time being the idea of closing our tax collection deficiency by auditing more businesses and high income individuals has been dropped from the Senate infrastructure plan. Republican lawmakers had their way squeezing Democrats and the White House to lose the proposal. If the political climate is better perhaps by year end this idea will be revived. But don’t hold your breath. Few politicians like their constituents to know that they support more IRS activity.

3) When the last president was mucking about the White House, the talk was that the limitation of state and local taxes of $10,000 was designed to punish the blue states who had voted against him. But now we will soon be completing the first year of Uncle Joe’s fiefdom and the SALT limitations continue. But Hark, perhaps change is in the wind. But how could this law be repealed when that would benefit mainly upper income taxpayers? So the discussion surrounds lifting the amount to perhaps $15,000 or repealing it only for people with incomes of $400,000 or less. Much needed relief for New Jersey, see item #1 above!

4) The like-kind exchange rules came straight from heaven. Taxpayer investors in real estate were able to postpone their taxable gains by rolling over one property to another not by a sale but by an exchange. Basis adjustments and a few abracadabras and sometimes complicated maneuvers with the assistance of we lawyers could result in huge fortunes of tax being deferred. But as you know America is broke so tax proposals these days look for ways of raising revenue without increasing tax rates. So it comes as no surprise that the talk is for limiting gain deferral in like kind exchanges. The idea would be that each taxpayer would be able to limit deferral of taxable gain to $500,000 each year or $1 million for a married couple. Gains in excess of the $500,000 or $1 million would be immediately taxed with no deferral. Many is the well advised to do the deal soon if taxes are of concern.

5) “Everything old is new again.” So 75 is not all that old any more. Remember when you thought 50 was decrepitude?  With people living longer and working well past that 75 mark, Congress is considering raising the age for required minimum distributions(RMD) from its current 72 to 75 .It seems like just the other day it was 70 ½. For those hell-bent on continuing to work till they drop, I guess this comes as good news. Your beneficiaries will love you for it.

6) Congratulations to the State of Maryland for passing a tax “snitch” law. It’s the first state in the nation to have one. (DC has one too) Whistleblowers who report substantial violations of the Maryland tax laws can scoop up 15 to 30% of the amount the state recovers. It works well for IRS as ordinary taxpayers in effect do the work of unpaid agents seeking out tax evaders and tax crimes of all kinds. Those of thinking of moving to Maryland to get into this low impact moneymaker should realize it goes into effect October 1.

My New Jersey

 

A crowded tri-State moon,
Big hair dames and gangster goon.

 

Turnpike exits number home,
Sardine packed, nowhere to roam.

 

Car insurance through the roof,
Pick-up after your woof-woof.

 

Housing costs sure to shock,
Mini-mansions stuffed with shlock.

 

Home town air you can see,
Ah, what Jersey means to me.  (With love from “Here’s Rhyme in Your Eye”…TMD)