Any time soon, the House of Representatives is poised to vote on the latest bipartisan tax bill seeking to raise the current $10K SALT deduction cap to $20K for married couples. Captioned as Marriage Penalty Elimination Act, the increment is set to modify the SALT deduction guidelines included in the Tax Cuts and Jobs Act. However, the proposed deduction increment will apply only to the forthcoming 2023 tax filing.
Any time soon, the House of Representatives is poised to vote on the latest If Congress approves the $20,000 increment, it will take effect only in the filing of the 2023 tax returns by jointly-filing married couples. In that case, it denotes that the original $10K SALT deduction cap and existing guidelines will prevail thereafter, until the Tax Cuts and Jobs Act expires in 2026.
What Exactly is the SALT Deduction Cap and How Does It Affect Taxpayers?
First off, the acronymtate and ;pca; tax deductions SALT stands for State and Local Tax and used to specify the allowed deductions that both single and jointly filing taxpayers can claim in their annual tax return; but up to 2026 only.
The present rule is that the SALT deduction is capped at $10K for joint-filing and single taxpayers who deduct local property, income and sales tax on their federal return.
However, the allowed SALT deductions apply only for taxpayers who opted to file returns using the itemized method. It does not apply if the return was filed using the standard deduction method. The latter does not require the itemization of the expenses deducted from earned income or sales revenues as it uses only a certain percentage for claiming deductions.
Moreover, a taxpayer cannot claim as deduction both the taxes paid for sales revenues and for income earned as remuneration. A taxpayer must opt to use as deductions either the taxes paid on income or the taxes paid on sales revenues.
The currently proposed increase of SALT Deductions Cap to $20K is for the benefit of jointly-filing married couples whose adjusted Gross Income amounts to less than $500,000. Again, the increase, if approved, will affect married couples and will take effect exclusively for the 2023 tax filing only. Thereafter, the deduction cap reverts to $10K unless a new legislation is passed between 2024 and 2026.
