Homeowner Taxes: SALT Deductions Cap Increase in Doubt — How It Could Double Your Payment
The proposed increased limit on the SALT cap, or the maximum deduction that families can take for their payments of state and local taxes, could be in jeopardy as the Build Back Better bill stalls in the Senate. Among the the many provisions on the bill that would help middle- to upper-income families, the BBB proposed a $70,000 increase in SALT deductions through 2030.
Currently, taxpayers can only deduct up to $10,000 of the state and local taxes paid. For homeowners in high-tax districts, notably in states like New York and New Jersey, the low SALT cap results in double taxation on this money. These homeowners are paying state and local taxes, but also federal taxes on that income. Removing the SALT cap limit would allow taxpayers to deduct up to $80,000 of their state and local tax payments.
“The bill we just passed in the House would effectively eliminate the impact of the SALT cap for virtually every family we represent, putting money back in the pockets of hardworking, middle-class families in New Jersey and New York,” said Democratic House representatives Bill Pascrell, Tom Suozzi, Josh Gottheimer and Mikie Sherrill in a joint statement.
New Jersey tops the list of states with the highest property tax rate, coupled with some of the highest average home prices in the country. Neighboring New York ranks 7th highest in the national for property taxes, according to statistics from Rocket Mortgage.
Republicans and Democrats who oppose the plan say it would put money in the hands of millionaires, while taxpayers making less than roughly $100,000 per year would get less than $20 back on their taxes. Republicans passed the SALT Cap as part of the 2017 Tax Cuts and Jobs Act.
The SALT cap repeal would also be one of the more expensive portions of the Build Back Better bill, costing the U.S. government roughly $475 billion in lost tax revenue, according to the Committee for a Responsible Federal Budget. The organization said that $400 billion of that tax cut would affect the top 5% of American earners.
With Democrats in middle-income, high-tax districts opposing the repeal, it remains yet another sticking point in passing the BBB bill.
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