April 19, 2024
The Trump-era tax law could undergo sweeping changes. As a result, millions of people could get bigger tax refunds this year.

A tax provision that is part of President Donald Trump’s 2017 Tax Cuts and Jobs Act could be subject to a last-minute change, potentially giving millions of Americans bigger tax refunds this year.

At stake is the so-called state and local tax deduction, or SALT deduction, which was limited to $10,000 in Trump’s signature tax law. But a new proposal would raise the limit to $20,000 for married couples, with the change retroactive to the 2023 tax year.

If it moves forward, the proposal could provide millions of married taxpayers with bigger tax refunds in 2024.

Before the SALT deduction limitation, taxpayers could deduct all of their state and local taxes from their federal taxes, a strategy that some policymakers saw as primarily benefiting wealthy homeowners in high-tax states like New York and California. I have criticized. But some lawmakers also say the $10,000 limit is increasingly hurting middle-class homeowners who live in areas where property taxes are rising.

Additionally, the $10,000 limit is also viewed by some as a marriage penalty, given that the dollar limit applies equally to both single taxpayers and married taxpayers. Most tax provisions, such as the standard deduction and tax brackets, are higher for married couples filing jointly, given that their tax returns reflect the earnings of two people.

“This is a pro-family tax measure that rightes a wrong, and it’s ultimately about fairness,” Representative Mike Lawler, a Republican from New York who introduced the bill, said at a Thursday committee hearing about the measure.

He said his constituents are feeling the effects of higher housing costs and inflation, and providing tax relief could help many of them as well as taxpayers across the country.

The cost of doubling the SALT limit for married filers to $20,000 would reduce federal tax revenues by about $12 billion, according to a new estimate from the University of Pennsylvania’s Penn Wharton Budget Model. By comparison, Peter G. According to the Peterson Foundation, the SALT deduction cost the federal government $69 billion in tax revenue in 2017, the year before the $10,000 limit was implemented.

How will the SALT change work

The proposed legislation, called the SALT Marriage Penalty Elimination Act, would raise the limit on the state and local tax deduction from $10,000 to $20,000 — but only for the 2023 tax year.

The change will apply to joint returns in 2023 for couples with adjusted gross income less than $500,000, which includes all but the nation’s top-earning married couples.

If enacted, it would mean married couples could double their SALT deduction for the current tax season, which began Jan. 29 and ends April 15.

After 2023, until the end of 2025, when the deduction limits, along with many other provisions of the Tax Cuts and Jobs Act, expire, the SALT cap will return to $10,000 per filer, regardless of filing status.

What are the chances of it passing?

According to the Tax Policy Center, the House could vote on the SALT Marriage Penalty Elimination Act next week.

But the limits on the SALT deduction have created confusion for some lawmakers. For example, Republicans traditionally push against higher taxes for wealthy individuals, but some see the SALT limit as a way to ensure that taxpayers in wealthier states pay less than residents of lower-taxed states. Don’t get big tax benefits.

According to the Peterson Foundation, before the deduction limit was implemented, about 71% of the SALT deduction was enjoyed by taxpayers with income over $200,000.

And Democrats traditionally support progressive tax policies that raise taxes on the wealthy, but limiting the SALT deduction also hits many middle-class families in high property tax states in the Northeast and West Coast, leading some to Pressure is being exerted to repeal the measure.

Over the past few years, a number of lawmakers have suggested rolling back the SALT deduction limit or simplifying it, but those efforts have failed to gain momentum. The most recent proposal has been introduced by a Republican lawmaker, at a time when more GOP members are becoming interested in providing some SALT relief to homeowners, as The Washington Post reported last year.

“We must get the job done and get this passed in the Senate and sent to the President quickly. Hard-working middle-class families across our country deserve this vital relief,” Lawler said in a statement Thursday.

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Source: www.cbsnews.com

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