TAX BULLETIN – Tax Tips, News, & Updates: Issue No. 3 | Vol No. 5
The next series of issue No 3 will focus on Tax related aspects of the One Big Beautiful Bill Act! This volume No 5 (newsletter) focuses on the increase in State and Local Taxes (SALT) deduction.
Current Tax Policies on SALT
SALT taxes are state and local taxes such as income, property, and personal taxes paid in their states. Prior to 2017, the IRS allowed most of these taxes to be included in their itemized list of deductions on their federal taxes. This helped to lower taxpayers’ tax liabilities. However, in 2017, the Tax Cuts and Jobs Act (TCJA) passed into law by Congress and signed into law by Pres. Trump capped this amount to $10,000.
Impacts of this 2017 TCJA Bill
Taxpayers in expensive states such as California, New York, New Jersey, etc. were really hurt by this Bill. The passing of the portion of the bill affected taxpayers who can itemize; it immediately increased their tax liability in their 2017 taxes. Those who opposed this $10K cap argued that unfairly biased against and penalized those who are paying thousands of dollars in income and property taxes, etc. while favoring those in states with no income taxes or low property taxes.
This One Big Beautiful Bill (OBBB) Act: HR1 of the 119th Congress bill reduces taxes, reduces, or increases spending for various federal programs, increases the statutory debt limit, and otherwise addresses agencies and programs throughout the federal government. One good thing is the provision for itemizers and non-itemizers to deduct a small amount of charitable contribution which will help lower their tax liability!!
HR1 OBBB Act Policies on SALT
As passed by the House, Section 110101 of H.R. 1, the One Big Beautiful Bill Act creates a new SALT tax deduction cap of $40,000 for tax years 2025 through 2029, which could be claimed if the taxpayer can itemize their deductions. It does not apply to those who can only use the standard deductions to lower their taxable income.
As most bills do, the above SALT deductions come with all the caveats of political nuances. This SALT cap increase will not last long. In 2025 through to 2029, the cap will increase by 1% each year. However, in 2023, the cap will revert to ONLY $10, 000.
Other things to note about this controversial Bill are:
- One of the main tenets of the Bill is that is permanently extends the 2017 Tax Cuts and Jobs Act (TCJA), which was set to expire at the end of this 2025 unless Congress acted.
- In addition to the tax policies the Bill includes significant changes to immigration, energy, healthcare, and so-called “safety net programs” such as Medicaid.
- Projections from the Congressional Budget Office (CBO) and independent analysts estimate that Trump’s OBBBA will add from $3.3 trillion to $4.5 trillion to the national debt in the next decade.
Reactions to the Bill
Results of independent research and analyses from several organizations have suggested that most of the benefits of this Bill skew toward the wealthy. Kiplinger also reported on the results of their opinion polls on this Bill They conclude that more Americans oppose than support the big bill.
Business Taxes for C-Corps; S-Corps; Partnerships are due by March 15, 2026!
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WE HOPE YOU ENJOYED & LEARNED FROM THIS MONTH’S BULLETIN!
Contact us for more information which is specific to your situation as there are always exceptions to the IRS rules and specific to the states’ rules!
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