Repeal of SALT Deduction to Expire With Individual Tax Breaks

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Laura Davison

The federal deduction for taxes paid to state and local governments would be repealed temporarily under the Senate’s reform bill introduced Nov. 20.

In fact, nearly all of the individual tax provisions in the Senate bill would expire at the end of 2025, leaving to future lawmakers the decision to extend the higher standard deduction and lower tax brackets. Changes in corporate rates would be permanent under the Senate plan.

Individual tax breaks, such as the personal exemption and state and local deduction, would again be available in eight years, but tax-increasing provisions, such as the alternative minimum tax and the $5.49 million individual exclusion for the estate tax, also would return.

Trump administration officials have said the intent is to extend the individual tax breaks once they near their expiration date. Lawmakers try to set up situations that will force future Congresses to act, Jason Oh, a professor at the University of California, Los Angeles, School of Law, said.

“This was the idea with the sequester,” Oh said referring to a process that pulls funding for many popular government programs unless Congress stays within budget limits. Lawmakers “set up a system that if Congress doesn’t act, it will be so bad that Congress would be forced to act.”

To contact the reporter on this story: Laura Davison in Washington at ldavison@bloombergtax.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bloombergtax.com

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