Bill to Fix State and Local Tax Cap Penalty for Married Filers Advances to the House
More retroactive changes to 2023 tax laws are on the table. Last night, the House Rules Committee voted in an emergency hearing to advance the SALT Marriage Penalty Elimination Act that allows married taxpayers filing jointly with AGI under $500,000 to deduct up to $20,000 in state and local taxes for 2023. If you recall, the Tax Cuts and Jobs Act of 2017 limited this deduction to $10,000 for single and married taxpayers alike and it is commonly referred to as the SALT cap.
Representative Mike Lawler (R-NY) introduced the bill, noting the unfairness of the cap towards married taxpayers. According to Lawler, 9% of married filing joint taxpayers used the state and local tax deduction in 2020, compared to 31% in 2017, or a decrease of 31.1 million taxpayers. For many taxpayers, the lower limits of the of the SALT cap combined with the higher standard deduction, made itemizing impossible. The SALT cap was not attached to the Tax Relief for American Families and Workers Act passed by the House earlier this week. The one year cost of the bill is estimated at $8 billion, and the 10 year cost is $7 billion.
The House is expected to vote on this bill as soon as next week, but nothing has been formally scheduled. Passage will not be without a fight though. Rules Committee Ranking Member Jim McGovern (D-MA) does not consider this to be a bill worthy of emergency procedures and believes this bill is being used for political maneuvering. Others believe that a one year “fix” isn’t worth the time given that we already into tax season but do agree that the marriage penalty is a problem.
Regardless, there is much uncertainty and drama in the world of income tax right now. As we stressed in our last post, patience with the process will be necessary. It should not be about who files their return first but who files utilizing the most favorable tax provisions to achieve an accurate result. All of these pending legislative acts are favorable to taxpayers. Extend is your friend…Amend is not.
Kelly Jackson Hardy is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers, privately-held elevators and supply dealers, and cooperatives. Kelly is a principal with CliftonLarsonAllen in Princeton, Illinois, as well as a regular speaker at tax and estate planning seminars. Kelly was raised on a hog, row crop and cattle farm in central Illinois and has been involved in the ag industry her entire life. Kelly, her husband, and two sons are active in 4-H and operate a small feeder calf operation and pumpkin business.
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