Bill chips away at SALT block but comes with drawbacks, advisors say
Legislation that would raise the limit on state and local tax deductions for some taxpayers chips away at a frustrating SALT block but would come with some drawbacks, financial advisors say.
Republican members of the House of Representatives recently introduced a bill, the SALT Marriage Penalty Elimination Act, that would increase the deduction for state and local taxes to $20,000 for couples earning less than $500,000 in the 2023 tax year.
The bill, written by lawmakers from New York, California and Maryland, seeks to restore at least some of the SALT deduction that was capped at $10,000 in the Tax Cut and Jobs Act, which was signed into law in 2017.
The SALT limitation helped generate revenue to pay for many individual and corporate tax breaks contained in the 2017 measure. But it also produced a strong backlash from Republicans and Democrats in states with high income taxes, such as New York, California and New Jersey.
Advisors generally like the idea of raising the limit on the SALT deduction.
“While it’s not the SALT limit lift we’d like to see, it certainly makes it equitable between single and married-filing-joint filers, especially when you look at it in light of state income tax on earnings,” Joanne Burke, owner of Birch Street Financial Advisors in Vienna, Virginia, wrote in an email. “Under the current scenario, there’s a marriage penalty for the SALT cap.”
Tyler Whitehouse, managing director for personal wealth at RMR Wealth, said boosting the SALT deduction limit would help many of his clients. His firm is based in Montclair, New Jersey.
“I would love to have SALT get raised to $20,000, if not higher,” Whitehouse said.
One of the drawbacks of the bill, however, is that it provides the SALT deduction increase
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