State Taxes Deductible Again?

The 2017 Tax Cuts and Jobs Act (TCJA) capped state and local tax deductions (SALT) at $10,000, kneecapping itemizers who ultimately faced net higher tax bills. Now SALT deductions are back on the table. Full repeal is unlikely, but the Democratic outline for the reconciliation bill may include “SALT cap relief.” A full repeal would be expensive since Congress’s Joint Committee on Taxation says full repeal would cost the Treasury $89 billion in foregone revenue per year. Another option for the SALT issue could be to repeal the SALT cap for taxpayers below some income threshold, such as the $400,000 minimum Biden has drawn as a starting point for tax hikes. That change would help the middle-class taxpayers the Biden administration most seeks to assist.