Treavor Dodsworth CFP®, CPA, CKA®
#115 - What's all this talk about SALT?
SALT is an acronym that is being tossed around pretty regularly right now due to some potential changes on the rise. So what is SALT and does it matter?
When someone references SALT in the financial world they are referring to the State and Local Tax deduction and more likely the cap on the State and Local Tax deduction that was implemented by the Tax Cuts and Jobs Act (signed into law in late 2017).
Most taxpayers deduct the higher of the standard deduction or itemized deductions on their federal tax return. Itemized deductions are state/local income taxes, property taxes, charity, mortgage interest, medical, etc. Some of the itemized deductions have hurdles or limits. The deduction for SALT items (state/local income tax, property tax, etc.) was capped at $10,000 for most taxpayers ($5,000 for Married Filing Separately).
This cap impacted many taxpayers but disproportionately those that were higher income and/or in states with high taxes. These individuals may get some reprieve. There is now a bill in place that if passed would increase this cap dramatically. The latest number I have seen is an $80,000 cap (limited time period). If passed, this could result in substantially more tax deductions for many individuals.
So, this one is for all the Bible/financial nerds out there, if the SALT loses it’s saltiness, how can it be made salty again? In this case, we shall wait and see. :)
Interesting Article(s) or Video(s)
Tax Foundation - State and Local Tax (SALT) Deduction
If you click “Expand Definition,” they have an interesting chart that shows how individuals across the country were impacted.
Thank you for reading!