New limit on state and local taxes which you can deduct from your federal income tax return is $10,000. Obviously, if you move to a state where there is 0% income tax, instead of say highest tax bracket of 10.55% in California for every dollar earned over $1M, you can see why it has become even more advantageous for athletes to work outside of California.
Let's take a simple example. A California resident makes $10M in taxable income in a year. Ignore the first $1M (which I assure you the state and fed government won't do, but it helps to keep the example simple). On the $9M after the first $1M that person owes California an additional $949,500 in state income tax. Under the old rules the person could use the entire $949,500 as a deduction on their federal income tax return, reducing their fed taxable income to $9,050,500 (this isn't even considering the deduction for property taxes which are probably high, say 5% of the home's assessed value).
Under the new rules the max state and local taxes deductible is $10,000. For this simple example the new federal taxable income is now $9,990,000. That's around another $850,000 in federal taxable income the person now owes federal income tax on, and it's taxed at the highest federal rate of 37%. That's around $315,000 in additional fed income tax.
https://smartasset.com/taxes/trumps-plan-to-eliminate-the-state-and-local-tax-deduction-explainedble
Starting with the 2018 tax year, the maximum SALT deduction is $10,000. There was previously no limit. This will leave some high-income filers with a higher tax bill. The limit is also important to know because the 2018 standard deduction is $12,000 (for single filers). So you need to have another $2,000 of itemized deductions, beyond the SALT deduction, in order to itemize.
How the New Limit on SALT Deductions Affects Homeowners - Mitchell Wiggins
Under prior law, in addition to being allowed to deduct 100% of state and local income (or sales) taxes, homeowners could deduct 100% of their state and local personal property taxes.
In other words, there was previously no limit on the amount of personal (nonbusiness) SALT deductions you could take, if you itemized. You also had the option of deducting personal state and local general sales taxes, instead of state and local income taxes (if you owed little or nothing for state and local income taxes).
Under the TCJA, for 2018 through 2025, itemized deductions for personal SALT amounts are limited to a combined total of only $10,000 ($5,000 if you use married filing separately status). The limitation applies to state and local 1) income (or sales) taxes, and 2) property taxes.
Moreover, personal foreign real property taxes can no longer be deducted at all. So, if you’re lucky enough to own a vacation villa in Italy, a cottage in Canada or a beach condo in Cancun, you’re out of luck when it comes to deducting the property taxes.
