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New York Lawmaker Seeks to Reopen Negotiations on State and Local Tax Deduction Cap
A New York lawmaker is pushing to reopen discussions on expanding the state and local tax deduction following a recent increase in its cap to $40,000. This effort comes as Congress considers potential tax legislation before the midterm elections. The move addresses ongoing concerns in high-tax states about federal tax provisions.
Apr 8, 9:54 AM·2m read1 source
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A New York lawmaker has proposed reopening negotiations to expand the state and local tax (SALT) deduction. U.S. lawmakers' decision last year to raise the cap on the deduction to $40,000. This cap applies to itemized deductions for state and local taxes on federal income tax returns.
The SALT deduction allows taxpayers to subtract certain state and local taxes from their federal taxable income. Prior to 2017, there was no cap on this deduction. The Tax Cuts and Jobs Act of 2017 introduced a $10,000 limit, which affected residents in high-tax states like New York.
Last year, Congress passed legislation increasing the cap to $40,000 for certain taxpayers. According to @business, this adjustment was part of broader tax relief measures. The change provided partial relief but did not fully restore the pre-2017 levels.
The original $10,000 cap under the 2017 law was set to expire after 2025.
High-tax states, including New York, California, and New Jersey, have long advocated for its repeal or expansion due to the financial burden on residents. Lawmakers from these states argue that the cap disproportionately impacts middle- and upper-income households facing higher state taxes. The recent increase to $40,000 was a compromise in last year's tax bill.
It primarily benefits married couples filing jointly with incomes below certain thresholds. However, critics note that it still limits deductions for many high earners in urban areas.
The New York lawmaker's proposal aims to build on this momentum.
Negotiations could target further increases or the elimination of the cap altogether. This effort is timed ahead of potential congressional action on a second tax bill before the November 2022 midterm elections. Congressional Republicans and Democrats have differing views on tax policy.
