Congress

State and Local Tax Reprieve Still Possible as Democrats Hone Spending Bill

Stefani Reynolds | Bloomberg | Getty Images
  • As Democrats finalize their $1.75 trillion spending plan, relief for the $10,000 deduction cap for state and local taxes is still possible.
  • However, negotiations are ongoing and the plan specifics may change as lawmakers hammer out the details.

As Democrats iron out their $1.75 trillion social and climate spending package, the plan may still include relief for the $10,000 cap on the federal deduction for state and local taxes, known as SALT.

The limit has been a pain point for high-tax states, such as New York, New Jersey and California, preventing Americans who itemize deductions from writing off more than $10,000 for property and state income taxes on their federal returns. 

While the measure wasn't addressed in President Joe Biden's framework, House Democrats on Tuesday inched closer to an agreement on SALT relief.

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One plan may be a five-year repeal from 2021 through 2025 with a reinstatement from 2026 through 2031. Another includes a three-year repeal with a higher cap after 2025. However, proposals may change as negotiations are ongoing.

While details are still pending, a few House Democrats voiced optimism about the current progress.

"Today's news is encouraging for a SALT cap repeal to be included in the final reconciliation package," Reps. Josh Gottheimer, D-N.J.; Tom Suozzi, D-N.Y.; and Mikie Sherrill, D-N.J., said in a joint statement.

"We will continue to work with House and Senate leadership to ensure the cap on the SALT deduction is repealed," they said. "No SALT, no deal."

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