How’s your deductive reasoning?

GOP’s standard deduction change a taxation brain teaser

ATLANTA — A popular deduction targeted in the GOP’s overhaul of the tax code is used by more than a quarter of all filers in a majority of states, including many led by Republicans where some residents eventually could see their federal tax bills rise.

The exact effect in every state isn’t known, in part because of differences in the Senate and House versions of the bill. But the change to the deduction for state and local taxes could alter the bottom lines for millions of taxpayers who itemize.

Residents in high-tax, Democratic-led states appear to be the hardest-hit. But some filers also could be left paying more in traditional Republican states, such as Georgia and Utah, where about a third of taxpayers claim the deduction.

How many winners and losers are in each state depends in large part on another aspect of the Republican tax overhaul that would nearly double the standard deduction, to about $12,000 for individuals and about $24,000 for married couples.

The Tax Policy Center, run by the Urban Institute and Brookings Institution, has estimated that the number of people itemizing deductions would drop by three-quarters. Some of those taxpayers could get a larger deduction under the Republican plan, even though they no longer could claim a break for state and local taxes.

Yet estimates by the Tax Policy Center and a nonpartisan congressional analysis say some taxpayers eventually will end up owing more in federal taxes under the GOP plans.

The left-leaning Institute on Taxation and Economic Policy said changes to the state and local tax deduction under the House bill would contribute to one of every five taxpayers in the hardest hit states getting a higher tax bill. While most of those states are led by Democrats, Republican-led Georgia and Utah, and the swing state of Virginia were among them.

Most tax filers currently take the standard federal deduction of $6,300 per individual or $12,600 for married couples. But some reap larger tax breaks by itemizing deductions for state and local taxes, medical expenses, charitable contributions and interest paid on home mortgages.

The state and local tax break is the largest of those.

The top 10 states with the highest average state and local tax deductions all voted for Democrat Hillary Clinton in last year’s election.

But when analyzed by the percentage of taxpayers claiming the deduction, several states won by Trump rank in the top third nationally.

Because of its widespread effect, debate over curtailing the deduction already is creeping into competitive 2018 elections.