The State and Local Tax (SALT) deduction is one that has gone through considerable changes in the last few years. It stands as one of the largest federal tax expenditures, although the estimated cost will plummet after the Tax Cut and Jobs Act (TCJA) increased deduction amounts, capping the SALT deduction at $10,000.
But what does this mean for the taxpayer? The TCJA limits the SALT, meaning that taxpayers cannot deduct more than 10,000 of total state and local taxes. It is a provision set to expire after 2025, but for now has reduced the amount of taxpayers who will itemize deductions.
Is it Worth it to Claim the SALT Deduction?
In 2016, less than a third of taxpayers itemized deductions—and almost all who did claimed a deduction for SALT. In order to determine whether or not to claim the SALT deduction, you must first establish if you are a high-income household or a low- to moderate-income household, as high-income households benefit more from the SALT deduction.
As an example, in 2016, 11 percent of taxpayers with incomes less than $50,000 claimed the SALT deduction. Comparatively, 80 percent of taxpayers with incomes in excess of $100,000 claimed the SALT deduction. These high-income houses made up 17 percent of taxpayers, but accounted for 77 percent of SALT deductions reported.
With the tax system constantly evolving, it’s good to know where you stand—and our experts at Atherton & Associates, LLP can help advise you on what’s best for the largest return.