Congress is debating changes to the state and local tax (SALT) deduction cap. The cap was set at $10,000 in 2017 under President Trump’s tax law. This limit has been criticized for hurting taxpayers in high-tax states like New Jersey, New York, and California.
Stephen Moore, a former economic adviser to Trump, recently suggested raising the cap to $20,000 or more. He said a full repeal would be too costly and mainly benefit the wealthy. Moore stressed that Republicans need to find a compromise to pass their tax bill.
New Jersey has some of the highest property taxes in the nation. Many homeowners pay well over the current $10,000 cap. Raising it to $20,000 would provide relief to more residents, according to tax policy experts.
Some Democrats in Congress want to go further. They have proposed lifting the cap to $100,000 or even $200,000 for married couples. But progressives argue this would be a tax break for the rich.
Debate over SALT cap adjustments
Most of the benefits would go to households earning $200,000 to $500,000 per year. Supporters say the SALT deduction helps middle-class homeowners.
In 2016, the average deduction in New Jersey was over $18,000. The largest group of filers earned between $100,000 and $200,000. The debate is expected to be contentious as Congress works on tax legislation.
Lawmakers from high-tax states are pushing hard for changes. But there is skepticism that a major rollback will happen. It remains to be seen if a compromise can be reached.
For now, tax experts advise being cautious about planning around the SALT cap. It is set to expire after 2025, but could be extended. The ultimate impact will also depend on other tax provisions.
Taxpayers should watch the legislative process closely and consult with professionals.
