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2021-5-25-09_Washington_DC_Capitol_Shutter_640x640

Financial Planning > Tax Planning > Tax Deductions

SALT Deduction Bill Heads for House Vote

By Melanie Waddell

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UPDATE: The bill was defeated 195-225 in a later vote Wednesday.

Legislation to double the state-and-local tax deduction cap for joint filers, H.R. 7160, the SALT Marriage Penalty Elimination Act, was sent to the House floor late Wednesday after a procedural vote of 213 to 209.

The bill — now headed for a vote by the full House — would double the cap to $20,000 for tax year 2023, if the couple’s adjusted gross income for the year is less than $500,000.

The SALT cap, part of the 2017 tax overhaul during the Trump administration, has long been criticized and targeted by lawmakers from high-tax states like New York and California.

Erica York, senior economist and research manager at the Tax Foundation in Washington, told ThinkAdvisor Tuesday in an email that the bill would “increase the budget deficit, create a new cliff in the tax code, and mostly benefit higher earners, all without improving long-run economic growth.”

The bill “takes a flawed approach to tax policy,” York said. “Instead of weakening the SALT cap, policymakers should strengthen it to pay for permanent improvements to the tax code like lower marginal rates and better cost recovery for business investment.”

If passed into law, the bill “would require taxpayers or the IRS to adjust already-submitted tax returns” since filing season has begun, the group noted in a Feb. 2 blog post.

A temporary and retroactive change as set out in the bill “would not assuage taxpayer uncertainty headed [into] 2025, as the $10,000 cap is scheduled to expire under current law but may be taken back up as part of broader efforts” to make the 2017 tax overhaul permanent, the blog states.

Melanie Waddell

@Think_MelanieW

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