Holding Court is a series by retired Rye City Court Judge Joe Latwin. Latwin retired from the court in December 2022 after thirteen years of service to the City.
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By Joe Latwin
“In this world, nothing is certain but death and taxes”[attributed to Benjamin Franklin, but from earlier play, The Cobler of Preston by Christopher Bullock (1716)]. First let’s talk of taxes – specifically what new stuff is this coming year.
First, the Standard Deduction increases to $31,500 for married couples filing jointly, and to $15,750 for single filers. In addition, there is a bonus deduction of $6,000 for single filers over 65, and $12,000 for married couples aged 65 and older. For married folks over 65, there will be a minimum total of $43,500 in deductions. On top of those deductions, you may deduct up to $40,000 (instead of $10,000) in state and local taxes (SALT) paid. This is especially good news for us in Rye where the real estate taxes alone on an average house assessed with a fair market value of about $1.5 million pays over $23,000 in real estate taxes alone. Add it your state and local income taxes and sales taxes and that new $40,000 cap is reachable. More good news! This SALT deduction cap will increase by 1% each year until (bad news) it drops back to $10,000 in 2030.
You may also deduct Tip income up to $25,000 for eligible workers and deduct Overtime pay up to $12,500 for single filers and $25,000 for married couples filing jointly.
You can also claim a child tax credit of $2,200 per qualifying child. Now, go forth and multiply!
If you are fortunate to die (?) in 2026 (as opposed to 2025), the Estate Tax Exclusion will increase to $15 million. No federal estate tax on the first $15 million!
Now on to death. A MyRye.com reader asked me to weigh in on the NYS fiscal cliff on estates of $7.5M+ at time of death. How could NYS come into line with FL or NH to eliminate this? Several years ago, the federal government increased the exemption amount from federal estate taxes from $600,000 to $1.2 million. New York did not follow suit and kept its low exemption. Several states (such as Florida and New Hampshire) either matched the federal exemption or did away with their own estate taxes entirely. States that did not started to see wealthier folks leave high tax states for low or no tax jurisdictions thereby avoiding not only estate taxes but taking their income (and the taxes that went with that income) away from the high tax states. The high tax states tax a lot because they also spend a lot. For instance, Florida has more people than New York but spends about three times as much as the Sunshine State. If you want to continue to spend, you need to tax to get the money to pay for that spending. To put the tax burden on the wealthier people, several states created tax cliffs that didn’t tax estates up to a certain amount, but once you hit that amount the higher tax rate began without it being graduated, i.e., instead of x% of the first $y and x-z% of the next $y dollars, the full tax was imposed on the first dollar).
Now for my two cents. Income is already taxed when it is earned. Interest, dividends, and capital gains are also taxed when earned. An estate tax taxes those items already taxed for the privilege of passing them on to your heirs. I think this is despicable. It’s your money. You earned it. You paid taxes on it already. Why steal from future generations.
Margaret Thatcher said, “the problem with socialism is that sooner or later you run out of other people’s money.” We are seeing and will continue to see this play out. After the last mayoral election in NYC, where the successful candidate promised to give away lots of stuff for free, residents are reading the writing on the wall and moving or planning to move to low tax places. It’s not the government’s to give. Government doesn’t produce anything – it only takes from others. This will not only affect NYC. Rye will become more desirable in the short run until the New York City Mayor runs to Albany seeking more state funds what will come from taxes on NY State residents including Rye, who will then flee to lower taxed places. At some point, you will run out of people who can pay taxes. The only way to kill a parasite is to starve it or it will kill you. You can either move or vote out the spenders and vote for people who will spend wisely and less.
