In late December, the House passed a bill, the Restoring Tax Fairness for States and Localities Act (H.R.5377), that would temporarily remove the SALT (state and local tax) deduction cap, if approved by the Senate. Before the Tax Cuts and Jobs Act, enacted in 2017, homeowners could deduct any amount paid toward state income taxes, local income taxes and property taxes. Due to the revamped tax law, however, the SALT deduction has been capped at $10,000 per return, or $5,000 for those married but filing separate.
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The new bill would increase the SALT cap from $10,000 to $20,000 for those filing joint returns in 2019, and would eliminate the cap for the 2020 and 2021 filing years. Support of the cap has been controversial, with some lawmakers believing the deduction largely supports the wealthy, providing an unfair advantage. Others, however, believe the average earner with even a modest home can be negatively affected by the cap, as homes in states with higher property taxes can quickly expend the entire $10,000 SALT limit.