In a key win for NAHB members who live in high-tax states, the House-passed Build Back Better Act includes long-awaited tax relief for taxpayers who are affected by the federal limit on state and local tax (SALT) deductions. The SALT deduction allows itemizing taxpayers to deduct taxes paid to state and location governments — including property taxes — from their federal tax return.
As part of the 2017 Tax Cuts and Jobs Act, the SALT deduction was temporarily capped at a maximum $10,000 deduction. Before the 2017 bill passed, there were no limits on the SALT deduction.
The House bill approved today would increase the $10,000 limit to $80,000, but also extend this higher, temporary cap through 2030. The current deduction limit is set to expire after 2025. But in 2031, the House bill would restore the lower $10,000 limit for one year before allowing the limit to expire.
Although NAHB opposes the Build Back Better Act, we support the relief included in the bill for taxpayers affected by the current limit on state and local deductions.
As the Build Back Better Act moves to the Senate, the bill is expected to undergo a number of changes. The Senate may scrap the House approach of lifting the cap for all taxpayers in favor of making the $10,000 deduction limit on SALT permanent but exempting from that limit taxpayers earning $400,000 or less. This remains an evolving effort, and NAHB remains actively engaged.
For high-cost, high-tax states, the $10,000 deduction limit effectively increases the ongoing costs of owning a home by denying home owners a full deduction of their property and other state and local taxes.
*Note: All articles have been redistributed from NAHBnow.com*