Democrats push to increase SALT deduction limit

House Democrats offer to temporarily raise the SALT (State and Local Tax) deduction cap to $80,000. The deduction is part of a $1,85 trillion social spending package. Currently, taxpayers who itemize deduction can claim no more than $10,000 per year. 

SALT limit went into effect in 2018 during the Trump presidency. It primarily affects filers in high-income states, such as New York, New Jersey, and California. For example, people who live in New York State pay local income tax that rates from 4% to almost 11%. In addition, New York City and Yonkers have their own income tax that varies between 3 to 3,9%. Some NYC residents who want to save money on taxes might decide to permanently move to states like Florida, Texas, New Hampshire, or Nevada because they have no local income tax. 

The SALT deduction helps taxpayers with middle and higher-income rates to build family wealth through investing in real estate. The SALT deduction cap turns younger generations away from purchasing a property in states with higher tax rates. Many of them prefer to move to places that offer a workaround for the SALT deduction limit. 

Rep. Josh Gottheimer of New Jersey has long fought to repeal the SALT limit. According to Gottheimer, the SALT cap deduction bill “will make life more affordable for families in our district.” County Executive Georges Latimer says that the increase of deduction limit “will lift up Westchester’s hard-working middle-class homeowners.” Rep. Sean Patrick Maloney of New York indicated on his website that he “will continue to fight to ensure that we provide this much-needed relief to Hudson Valley taxpayers.” 

Bernie Sanders, Senator of Vermont, is ready to offer tax exemptions for families earning less than $400,000 but does not support the overall deduction cap removal. Rep. Jared Golden of Maine opposes the current House version of SALT and states in his tweet that it “gives millionaires thousands in cash.”

The Committee for a Responsible Federal Budget called the increased SALT limit “costly and regressive” and estimated it will cost $300 billion through 2025. Considering that Republicans oppose the SALT deduction cap increase, all 50 Democratic Senators must vote to pass the bill. 

Resources:

“Tax Deduction That Benefits the Rich Divides Democrats Before Vote,” by Alan Rappeport and Patrick McGeehan (the New York Times, 2021)

“Democrats Push for Agreement on Tax Deduction That Benefits the Rich,” by Emily Cochrane and Alan Rappeport (the New York Times, 2021)

“Rep. Maloney Says SALT Cap Reform is on the One-Yard Line,” by John Jordan (Real Estate In-Depth, 2021)

“House Democrats want to raise SALT deduction cap to $80,000. What that means for your tax bill,” by Kate Dore (CNBC, 2021)

“These states offer a workaround for the SALT deduction cap,” by Kate Dore (CNBC, 2021)

“Who Benefits from the State and Local Tax Deduction?” by Garrett Watson (Tax Foundation, 2021)

“Gottheimer, Sherrill playing key role in restoring SALT deduction in upcoming House vote,” by David Wildstein (New Jersey Globe, 2021)

“Statement: After Years-Long Fight, Gottheimer Passes Legislation To Reinstate Salt,” (Josh Gottheimer, 2021)

“NEWS: Sanders Opposes Rumored SALT Tax Breaks for the Rich,” (Bernie Sander, 2021)

“County Executive George Latimer Statement on Raising of SALT Cap in Build Back Better Bill Passed by the House of Representatives,” (Westchester gov.com, 2021)

“$72,500 SALT Cap is Costly and Regressive,” (Committee for a Responsible Federal Budget, 2021)

“New York State Income Tax: Rates, Who Pays in 2021,” by Tina Orem (Nerdwallet, 2021)