Can I Have Some SALT With That?
Most of us know that Congress limited the state and local tax deduction (SALT) to $10,000 starting in 2018. Certain House and Senate members from high tax states such as New Jersey, New York and California have complained about this. Also, many of these states have enacted certain workarounds for pass-through entities that would allow a state income tax deduction at the entity level.
The current Build Back Better proposal reinstates a larger SALT limitation at the $80,000 level retroactive to January 1, 2021 but would then impose the $10,000 limit starting in 2031 on a permanent basis.
However, the Senate is likely not to go along with this. We hear that they are likely to allow a full deduction for those taxpayers with AGI under a certain level (such as $400,000) and then phase it back down to the current $10,000 cap. It appears that the cap will be set at a revenue neutral position which could be as high as $500,000.
At that point, the House and the Senate would have to reconcile each version to come up with the final rule. In each case, there will be a change to the limit, we just don’t know what it is yet.
We will keep you posted.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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