“One consideration may be related to a client’s municipal bond portfolio,” DiPeri added. “An individual holding many bonds of a state they don’t live in will be taxed in their [new] home state, as the bonds aren’t tax-exempt from state income tax.”
Some states have attempted to work arounds the deduction cap. “Some allowed individuals to make a deduction to a fund set up by the state and then take credit at the state level,” said Geoff Christian, Greenville, S.C.-based managing director at CBIZ MHM and leader of the national state and local tax practice. “While the IRS initially disallowed those workarounds, it just said it would continue to allow businesses to contribute to these funds and allow individuals to take a credit.”
Scott Donnelly, CPA and partner at PDM CPAs in Torrance, Calif., suggests clients also move (literally) slow. “While renting in the state they are considering they should keep their current residence,” he said, “in case they change their mind.”