How the Rich Can Dodge Trump’s Property Tax Hike

With the passage of the Tax Cuts and Jobs Act, a hotly contested provision within the Act was creating a $10,000 limit on federal deductions for state and local taxes, or SALT, such as property taxes. The greatest effect will be felt in states with higher taxes such as New Jersey, New York, and Connecticut.

Creating multiple non-grantor trusts – trusts that are treated as independent taxpayers – is one method to bypass the limit on tax deductions. First you must set up an LLC in a no-tax state such as Alaska or Delaware, then transfer interests of the assets subject to the SALT into the LLC. After that, transfer fractions of the LLC into the multiple non-grantor trusts. Each trust can then take the maximum $10,000 deduction.

This process is too burdensome and time-consuming for the uber wealthy; but for those that have who have property taxes totaling up to $100,000, tax experts say this is a highly beneficial method to save on taxes.

See Lynnley Browning, How the Rich Can Dodge Trump’s Property Tax Hike, Bloomberg, June 15, 2018.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.