the staff of the Ridgewood blog
Washington DC, Senate Democrats say a proposal to raise the cap on state and local tax (SALT) deductions, a top priority of Senate Majority Leader Charles Schumer (D-N.Y.), and very popular in high tax New Jersey is likely to be cut from the revised “Build Back Better Act”.
Congressmembers Josh Gottheimer (NJ-5), Tom Suozzi (NY-3), and Mikie Sherrill (NJ-11) issued the following statement on their efforts to repeal the cap on the State and Local Tax (SALT) deduction: “SALT remains a top priority. We support the President’s agenda, and if there are any efforts that include a change in the tax code, then a SALT fix must be part of it. No SALT, no deal.”
However Senate Democrats who were involved in negotiations over the bill before Sen. Joe Manchin (D-W.Va.) blew it up last month say there’s simply not enough room for the expensive tax change, which Republicans argue would benefit wealthy suburban households in blue states.
“Yeah, I think that’s dead,” said one Democratic senator, who requested anonymity to summarize early discussions about changing the bill to win Manchin’s support.
What is the SALT Deduction?
The federal tax reform law passed on Dec. 22, 2017, established a new limit on the amount of state and local taxes (SALT) that can be deducted on a federal income tax return. Beginning in 2018, the itemized deduction for state and local taxes paid will be capped at $10,000 per return for single filers, head of household filers, and married taxpayers filing jointly. The cap is $5,000 for married taxpayers filing separately.
Some states either have passed or are planning to pass new laws allowing taxpayers to make charitable contributions to government funds in exchange for state tax credits. If allowed, these creditable payments could enable taxpayers to effectively convert some of their lost SALT deductions to charitable deductions, which are generally fully deductible for those who itemize on the federal return.
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