While many taxpayers will be enjoying the new increased federal standard deductions put into place by President Trumps "Tax Cuts and Jobs Act", some Oklahomans will be scratching their heads wondering why their bill from the state of Oklahoma is higher than it's ever been. For the first time in a very long time, the state of Oklahoma has chosen NOT to set their deductions at the federal level. Citing Oklahoma's median wage of $32,000 and revenue shortfalls as major factors in this decision, I was informed by an employee of the Oklahoma Tax Commission that Oklahoma's standard deduction would be the same as it was last year, despite increased federal deductions.
This, combined with Oklahoma's decision to no longer treat your federal income tax paid as a deduction, means that taxpayers are the ones who are pulling Oklahoma out of debt once again.
Furthermore, Oklahoma has chosen to limit itemized deductions to $17,000. This means that if you do itemize (which requires beating a federal standard deduction of $24,000 for most families, no small task), Oklahoma is going to disallow at least $7,000 of your deductions required to itemize at the lowest federal level. While there are two exemptions to this cap, being donations of cash to charity/church and medical spending, a lot of people are going to be left out in the cold.
Especially gamblers. If you or anyone else you know is a heavy gambler, please pay special attention moving forward.
In the past, Oklahoma has used the IRS policy for gambling deductions. Basically, you only paid tax on the gambling income that was more than what you spent in the casino. For example, if I showed $25,000 in gambling winnings on my W2G's at the end of the year, but my players card showed I put $22,000 into the casino, I could deduct the $22,000 in losses on a schedule A (form for itemized deductions) and would only really pay taxes on the $3,000 that I actually gained.
Now that Oklahoma has implemented a cap of $17,000, many gamblers will be stuck with outrageous tax bills. For example, using the same numbers from earlier, I would now be paying Oklahoma on $8,000 in gambling income, instead of $3,000. That looks even worse when you realize that your $17,000 cap is already very likely to be half way used up between mortgage interest, property taxes, and other deductions.
I disagree 100% with the state's decision on this. We live in a state with multiple casinos and thousands of compulsive gamblers who cannot afford to suddenly have $15,000 in tax bills on top of their already expensive problems. The fact it was passed quietly in a legislative session and not announced to the public, nor were casinos required to hold out state taxes, means that even many casual gamblers will be blindsided this year. I fully recommend that you call your state representatives and make your voices heard.
If you want help trying to figure out where these changes leave you, Pelican can help. Feel free to call us or send an email so we can help you protect your family from these irresponsible tax changes.
405-265-7611
pelicantaxservices@gmail.com
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