In late December, the House passed a bill, the Restoring Tax Fairness for States and Localities Act (H.R.5377), that would temporarily remove the SALT (state and local tax) deduction cap, if approved by the Senate.
Before the Tax Cuts and Jobs Act, enacted in 2017, homeowners could deduct any amount paid toward state income taxes, local income taxes and property taxes. Due to the revamped tax law, however, the SALT deduction has been capped at $10,000 per return, or $5,000 for those married but filing separate.
The new bill would increase the SALT cap from $10,000 to $20,000 for those filing joint returns in 2019, and would eliminate the cap for the 2020 and 2021 filing years. Support of the cap has been controversial, with some lawmakers believing the deduction largely supports the wealthy, providing an unfair advantage. Others, however, believe the average earner with even a modest home can be negatively affected by the cap, as homes in states with higher property taxes can quickly expend the entire $10,000 SALT limit.
“The SALT cap is simply unfair. It imposes a marriage penalty through its uniform limit for single and joint filers and, while the standard deduction is pegged to inflation, the SALT cap is not,” National Association of REALTORS® President Vince Malta tells RISMedia. “Unless these policies are changed, more and more Americans will find that the tax incentives of owning and buying a home will diminish with each passing year. NAR applauds the House for passing this bill and will continue to push for fairness for home and property owners in the U.S. tax code.”
Many high-cost of living states with surging home prices, such as California, are in support of increasing the cap or removing it altogether, believing the cap hurts the real estate industry by removing a substantial tax deduction for a large percentage of homeowners.
At the time of the House passage, California Association of REALTORS® President Jeanne Radsick released the following statement:
“We are pleased that the House has passed a bill to temporarily eliminate the cap on the amount of state and local tax that taxpayers can deduct on their federal tax returns. The combined hit of a reduction in the mortgage interest deduction and current $10,000 SALT cap in the tax law has disproportionately hurt taxpayers and real estate in California. Ensuring the tax code incentivizes housing and real estate will continue to be a top priority for REALTORS®, and C.A.R. thanks the many California Congressional members who support easing the double taxation penalty that harms California homeowners.”
The Senate has not yet voted on the bill.
Stay tuned to RISMedia for more developments.
SALT should stay in effect. Why should federal government indirectly transfer monies to states and local jurisdictions which are inefficiently governed and over tax their residents. This is the first step to simplify the tax codes. Step two should be a total phase out of mortgage interest deductions as well as salt. Upon elimination of these deductions, the feds should consider another increase in standard deduction or tax rate reduction. .
I hope this passes. There are other items on the Property tax bill than just the real estate taxes.
School assessments and public services are billed alongside the property assessment.
I vote no. Leave the cap.
Interesting; I’ve never been able to deduct my property taxes here in Michigan. I believe the second paragraph is incorrectly stated.
Good luck getting it passed with the impeachment going on and the election year craziness too!
The SALT limit is very unfair. $20,000 is better than $10,000, but it is still not high enough.
I am against removing the 10,000 cap
California Congressional members who support easing the double taxation penalty that harms California homeowners.” please reject the increase. we will remember when we vote.
SALT is not unfair. What is unfair is allowing huge Federal tax breaks for some but not others. The “some” are the ones complaining, of course. They live in localities where they’ve elected politicians who’ve raised THEIR State and Local taxes through the roof, while telling them “At least you can write it off your Federal taxes”. If you don’t like the levels of your State and Local taxes, vote for leaders who will reduce them. Don’t expect the rest of the country to subsidize your locality’s “tax & spend” mentality. SALT treats everyone at least a little more fairly. What would be fair would be to disallow ANY deductions for State and Local taxes.
Please eliminate the cap!
Taxes continue to rise at local, county and state. Other costs that are really another tax such as filing fees, discount points, permits, application fees, venture fees and the list goes on.
Review your expenses three months, six or year. Note taxes you pay on everything. Fuel, utilities, liquor, travel, lodging, camping fees, income tax legal, drugs, etc. Work the numbers and see what you are paying. Are you SURPRIZED? What percentage are YOU really paying?
Thank you for working so hard for us as Realtors. Fairfield County in Connecticut has not fully come back from 2008!!!! And with Connecticut State tax on top of high Town taxes the average tax payer could use this relief.
I am in support of eliminating the SALT tax as it is deteriorating the real estate market for middle income earners .
SALT was introduced to offset tax breaks for top 10% and reduction in capital gains tax. The tax deductions help local economies by keeping the extra funds at the local level, which increase tax revenue in the long run and help sustain employment. 20% of fortune 500 do not pay taxes, so why not us, the millions of home owners across the 50 states?
I live in Colorado and don’t want to pay the taxes for high income individuals.
I vote to eliminate the cap.