Blog

Key Takeaways

• The state and local tax (SALT) cap would provide a tax cut only to those who itemize their taxes and pay more than $10,000 in state and local taxes.
• While two-thirds of millionaires would get a tax break because of proposed changes to the state and local tax deduction, those benefits would be significantly reduced starting in 2023.
• The latest plan would raise the cap from $10,000 to $72,500 for all taxpayers starting this year, except married couples filing separately who each could deduct up to $36,250.

The House has passed the Build Back Better bill,  a $1.75 trillion spending package that proposes sweeping changes for climate, healthcare, taxes, education and other policies. The reconciliation bill includes a $285 billion tax cut that would mostly benefit wealthy households over the next five years.  Increasing the SALT cap would provide a tax cut only to those who itemize their taxes and pay more than $10,000 in state and local taxes, a group comprised mostly of high earners. While two-thirds of millionaires would receive a tax break because of proposed changes to the state and local tax deduction, those benefits would be significantly reduced starting in 2023. Here are the top articles on how the proposed SALT changes may affect you.

The Second-biggest Program in the Democrats’ Spending Plan Gives Billions to the Rich

The Build Back Better bill includes a $285 billion tax cut that would almostexclusively benefit high-income households over the next five years. The state and local tax (SALT) cap increase would mostly benefit taxpayers on the coasts and in urban areas and is the is second-costliest provision of the budget bill over the next five years.  Raising the SALT cap would provide a tax cut only to those who itemize their taxes and pay more than $10,000 in state and local taxes — a group overwhelmingly made up of high earners.

Via Washington Post

Some High-income Households Could Get a Tax Cut Under the Democrats’ Build Back Better Framework

As the debate on what to include in Build Back Better (BBB) legislation, a major focus has been on how to raise taxes on corporations and the richest households. But a recent analysis has found that one component of the House’s BBB bill could actually result in a tax cut for many high-income households.

 Via CNBC

How the Build Back Better Bill Affects Taxes for Millionaires, the Middle Class

The Urban Institute-Brookings Institution Tax Policy Center projects that between 20% and 30% of lower- and moderate-income households will have lower after-tax incomes under the Build Back Better bill in 2022. While two-thirds of millionaires are getting a tax break because of proposed changes to the state and local tax deduction, those benefits would be significantly reduced starting in 2023.

Via Politifact

Related Articles

Key Tax Moves to Make Before Year’s End

Many Small Business Owners Are Missing Out on This $100,000 Tax Deduction 

Self-Employed Professionals, Take Note. Here’s How You Can Supercharge Your Retirement

The Latest SALT Cap Fix Would Mostly Benefit High Income Households, Do Little for Middle-Income People

The latest plan to adjust the cap on the state and local tax (SALT) deduction would provide little or no benefit for low and middle-income households but generate a big tax break for those with much higher incomes. The latest plan would raise the cap from $10,000 to $72,500 for all filers starting this year, except married couples filing separately who each could deduct up to $36,250. Under current law, the $10,000 cap expires in 2025, along with most other individual income tax provisions for the 2017 Tax Cuts and Jobs Act (TCJA). The higher cap would remain in effect through 2031.

Via Forbes

What Proposed SALT Changes Could Mean for Your Next Tax Bill

As negotiations over the Build Back Better Act (BBB) move forward, the state and local tax deduction, or SALT, has emerged as the latest intraparty bargaining chip. If the SALT cap changes currently being discussed for the reconciliation bill are passed, whether they’ll affect your tax bill depends on your income, where you reside, and other specifics, like property ownership.

Via Vox

SALT Proposal Gives Windfall to Top Earners in High-Cost Areas

High income individuals in expensive areas of the U.S., such as New York and California, are set to get a windfall from competing plans by Congressional Democrats to change the deduction limit for state and local taxes. Americans with six-figure salaries and high property and state income tax bills will see the most noticeable effects from lifting the $10,000 SALT cap, according to an analysis by accounting firm Marcum conducted for Bloomberg News.

Via Bloomberg