Raw: [A Trump-era tax law could get an overhaul. Millions could get a bigger tax refund this year as a result. CBS News] {Article Source: https://www.cbsnews.com/news/taxes-2024-salt-deduction-cap-20000/}
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A Trump-era tax law could get an overhaul. Millions could get a bigger tax refund this year as a result.
By Aimee Picchi
Edited By Anne Marie Lee
February 2, 2024 / 2:26 PM EST
/ CBS News
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03:48
A tax provision that is part of President Donald Trump’s 2017 Tax Cuts and Jobs Act could be in line for a last-minute overhaul, potentially delivering bigger tax refunds this year to millions of Americans. At stake is the so-called state and local tax deduction, or the SALT deduction, which was limited to $10,000 in Trump’s signature tax law. But a new proposal would lift the cap to $20,000 for married couples, with the change retroactive for the 2023 tax year. If it moves forward, the proposal could deliver bigger 2024 tax refunds to millions of married taxpayers.
Prior to the SALT deduction cap, taxpayers could deduct all their state and local taxes from their federal taxes, a tactic that some policymakers have criticized as mainly benefiting wealthy homeowners in states with high taxes, such as New York and California. But some lawmakers also point out that the $10,000 cap is increasingly impacting middle-class homeowners who live in regions where property taxes are rising.On top of that, the $10,000 cap is also viewed as a marriage penalty by some, given that the dollar limit applies to both single taxpayers and married filers alike. Most tax provisions, such as the standard deduction and tax brackets, are higher for married couples filing jointly, given that their tax returns reflect earnings for two people.
“This is a pro-family tax measure that rights a wrong, and this ultimately is about fairness,” said Rep. Mike Lawler, a Republican from New York who introduced the bill, in a Thursday committee hearing about the measure. He added that his constituents are feeling the impact of higher housing costs and inflation, and that providing tax relief could help many of them, as well as taxpayers across the nation. The cost of doubling the SALT cap to $20,000 for married filers would reduce federal tax revenue by about $12 billion, according to a new estimate from the University of Pennsylvania’s Penn Wharton Budget Model. By comparison, the SALT deduction cost the federal government $69 billion in tax revenues in 2017, the year before the $10,000 limit went into effect, according to the Peter G. Peterson Foundation.How the SALT change would workThe proposed law, called the SALT Marriage Penalty Elimination Act, would raise the cap on state and local tax deductions from $10,000 to $20,000 — but only for the 2023 tax year.
The tweak would apply to joint returns for couples with adjusted gross income below $500,000 in 2023, which would cover all but the nation’s top-earning married couples.If enacted, that would mean married couples could double their SALT deduction for the current tax season, which began on January 29 and ends on April 15. After 2023, the SALT cap would revert back to $10,000 per filer, regardless of filing status, until the end of 2025, when the deduction limit will expire, along with many other provisions from the Tax Cuts and Jobs Act. How likely is it to pass?The House may vote next week on the SALT Marriage Penalty Elimination Act, according to the Tax Policy Center. But the SALT deduction cap has created a topsy-turvy situation for some lawmakers. For instance, Republicans traditionally push against higher taxes for wealthy individuals, but some view the SALT limit as a way to ensure taxpayers in wealthy states don’t receive bigger tax advantages than residents of lower-tax states. Before the deduction cap was enacted, about 71% of the SALT deduction was enjoyed by taxpayers with incomes above $200,000, according to the Peterson Foundation.And Democrats traditionally support progressive tax policies that raise levees on the rich, but the SALT deduction cap also hits many middle-class families in states with high property taxes in the Northeast and West Coast, prompting some to push for a repeal of the measure.
During the past few years, plenty of lawmakers have suggested rolling back the SALT deduction cap or easing it, but those efforts have failed to gain traction. The most recent proposal has been introduced by a Republican lawmaker, at a time when more GOP members are increasingly interested in providing some SALT relief to homeowners, the Washington Post reported last year.”We must finish the job and get this passed in the Senate and sent to the President’s desk expeditiously. Hard-working middle-class families across our country deserve this critical relief,” Lawler said in a Thursday statement.
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In:
Taxes
Aimee Picchi
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
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First published on February 2, 2024 / 2:26 PM EST
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