Loan Officer | NMLS #834554
Branch NMLS #1607863
Posted On June 11, 2019
One of the major changes to the 2017 Tax Cuts and Jobs Act (TCJA) may soon be up for debate in Congress. Representative Mikie Sherrill (D-NJ) recently addressed state and local tax (SALT) deduction limits at a town hall in Bloomfield, NJ. Under the TCJA, taxpayers, regardless of income, cannot deduct more than $10,000 of total state and local taxes, including property taxes. This deduction cap disproportionately impacts residents of higher tax areas, like New Jersey, New York, and elsewhere.
During the town hall, Representative Sherrill assured her constituents, “every single member of your New Jersey delegation is on a bill to get rid of the state and local tax deduction cap.” Earlier this month, Sherrill, along with Representative Gil Cisneros (D-CA), Representative Elise Stefanik (R-NY), and Representative Peter King (R-NY), introduced a bill that would raise the SALT deduction to $12,000 for single taxpayers and $24,000 for married taxpayers filing jointly. In March, Representative Lauren Underwood (D-IL) and Representative Sean Casten (D-IL) introduced a bill to lift that cap to $15,000 for single taxpayers and $30,000 for married taxpayers filing jointly.
Such bills would benefit taxpayers in high-cost areas who used SALT deduction before the Tax Cuts and Jobs Act. In Sherrill’s New Jersey 11th district, over 40% of taxpayers deducted an average of over $20,000 using SALT deductions. Nationally, it’s a different story. The Tax Policy Center reports about 30% of taxpayers claimed SALT deductions in 2016, at an average of about $12,000. Further Tax Policy Center data suggests, repealing the SALT deduction cap would give 56% of the benefits to the top 1% of taxpayers, or households making $755,000 or more.
It's yet to be seen how these bills will do in Congress. Still, the issue of SALT deductions is unlikely to go away any time soon. New York Governor Andrew Cuomo has criticized the deductions and some high-cost states have set up workarounds to ease the limits. The Treasury Department has fought back against these workarounds, putting rules in place to prevent states from circumventing the cap.