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Visitor III

When I increase amount of property tax deduction, taxes do not drop

When I add a property tax deduction my federal taxes do not change, no matter how large. 

I am married filing separately and my spouse and I are itemizing. In past years, changing this value always reduces federal tax. This year, no matter what I enter (even very large numbers) the federal tax stays the same.

I checked Federal Information Worksheet Part IV and verified it says that I am filing married separately and my spouse is itemizing.

If I change status to married filing jointly, increasing property tax deduction decreases Federal tax.

1 Comment
TurboTax Specialist

When I increase amount of property tax deduction, taxes do not drop

 

It sounds like you might be subject to the Alternative Minimum Tax. 
 
While the rules and calculations for the AMT are quite complex, the basic result is the tax benefits you receive from certain deductions (like property taxes) are then wiped out by an increase in tax liability in the form of the AMT.  The net result is no change in your tax liability.  Also, the threshold for the AMT is going to be lower when filing separately, then filing jointly, so this would explain why you are seeing different results
 
You can read more information about the AMT at these links and you would find AMT tax liability on Line 45 of Form 1040.  
 
 
 

Also, there are phase-out rules for certain itemized deductions (including property taxes) -

 

If an individuals AGI in 2017 exceeds $261,500 (Single), $313,800 (MFJ), $287,650 (HOH), or $156,900 (MFS), then the total of certain allowable itemized deductions is reduced by the lesser of:
  • 3% of the excess of AGI over the threshold amounts, or
  • 80% of the itemized deductions subject to the limit and otherwise allowable for the year
So, if you are over these income thresholds, then you may be having your itemized deductions limited.