It doesn’t appear that Form 2210 Schedule AI is enforcing the SALT Limitation when annualizing. With an annualization factor of 4.0 in the first quarter, it looks as though you could have an annualized tax deduction as high as $40,000. Refer to lines 4 through 8 on Schedule AI. Line 8 selects the larger of the annualized itemized deduction or the standard deduction. Note that the standard deduction does not get annualized.
Does this look like a mistake in the design of Schedule AI for 2018?
I don’t know for sure, but I don’t think so. The regs state that the taxpayer computes actual income and deductions for the period in question and then annualizes them. They say nothing about applying limits to the annualized amount after the fact. This issue isn’t unique to the SALT limitation. For example, a taxpayer with a $3,000 net capital loss in the first quarter is getting a net capital loss of $12,000, and an individual who makes a $7,000 IRA contribution in the first quarter is getting a $28,000 deduction.