The term salt is more than just a common kitchen staple. In the realm of U.S. taxation, SALT stands for State and Local Tax. The SALT deduction has become a crucial topic for many taxpayers and lawmakers. It holds significant weight in debates over tax policy and impacts millions of Americans.
The SALT deduction lets taxpayers deduct certain state and local taxes on their federal income tax returns. These include state and local income taxes, property taxes, or even general sales taxes. However, you can only claim these deductions if you itemize rather than take the standard deduction.
In 2017, new federal legislation placed a $10,000 cap on the amount of state and local taxes that can be deducted. For some, this cap led to much smaller deductions than in previous years. According to recent CNN Business coverage, the cap drastically reduced the number of tax filers who benefit from the SALT deduction—from about one-quarter of filers in 2017 to less than 10% today. Residents of high-tax states, such as California and New York, are most affected.
Not everyone sees the same advantage from the salt deduction. Higher-income households, especially those with incomes above $200,000, benefit the most. Before the cap, these filers could deduct larger amounts, in some cases topping $30,000. After the cap, the average deduction dropped significantly. For more analysis on how different income groups are affected and which states claim the most deductions, visit this in-depth CNN report.
Discussion around changing or removing the SALT cap is intense. Lawmakers from high-tax states often push for raising the cap to give relief to their constituents. However, others see the deduction as a subsidy for wealthier residents in certain states. This debate continues to influence broader tax policy discussions in Congress. For live policy updates and the latest on how tax legislation is shaping up, check out POLITICO’s live updates.
SALT deductions are an important factor in federal tax policy. Whether you benefit depends largely on where you live and your income level. As lawmakers debate changes to the cap, it is crucial to understand how any future policies might affect your tax return. Stay informed so you can make the best financial decisions during tax season.