SALT Deduction = STATE & LOCAL TAX deduction.
The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, limited the itemized deduction for state and local taxes to $5,000 for a married person filing a separate return and $10,000 for all other tax filers. The limit applies to tax years 2018 to 2025.
This is a nice win for low tax states and people who live in those states. Probably not considered good by residents of high tax states. But during the Trump administration a maximum deduction was instituted that only allowed for partial deduction of state taxes, on your federal tax return, if your state taxes were very high. The high tax states HATED this idea. The low, middle and even modest tax states supported the idea because residents of these states, by default, where helping to offset the high tax states.
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The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, limited the itemized deduction for state and local taxes to $5,000 for a married person filing a separate return and $10,000 for all other tax filers. The limit applies to tax years 2018 to 2025.
This is a nice win for low tax states and people who live in those states. Probably not considered good by residents of high tax states. But during the Trump administration a maximum deduction was instituted that only allowed for partial deduction of state taxes, on your federal tax return, if your state taxes were very high. The high tax states HATED this idea. The low, middle and even modest tax states supported the idea because residents of these states, by default, where helping to offset the high tax states.
Supreme Court declines to hear New York challenge to Trump-era cap on SALT deductions
The SALT cap was part of the 2017 Trump tax cut package
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Supreme Court declines to hear New York challenge to Trump-era cap on SALT deductions
The Supreme Court on Monday declined to hear an appeal out of New York that brought a challenge against the cap on taxpayer state and local deductions implemented by the Trump administration.
In the case, New York v. Yellen, Janet Yellen, in her official capacity as secretary of the Treasury, is being sued by New York, New Jersey, Connecticut, and Maryland. The states initially sued Yellen's predecessor, Treasury Secretary Steven Mnuchin, and the IRS when the Trump tax cut of 2017 – of which the SALT cap is a part – went into effect.
The states argued that the SALT cap was unconstitutional – though that argument gained no judicial traction. In 2019, a federal district court ruled against the states, as did the U.S. Court of Appeals for the 2nd Circuit in 2021.
Some economists have argued that capping the SALT deduction invigorates economic growth by leveling pressure against high-tax states (like Connecticut, Maryland, N.J., and N.Y.) to lower their tax rates and balance their budgets. It also prevents, to a certain extent, a subsidization of high-tax states by individual in lower tax-states.