03/29/2024

State and local tax deduction not as valuable as it seems

The itemized deduction for state and local taxes has become a flash point in the debate over the GOP’s tax plans.

The House and Senate proposals call for sharply limiting or eliminating the so-called SALT deduction. Critics say Republicans in high-tax states would have a hard time voting for any bill that included this provision, because the deduction is so valuable to their constituents.

And it is, to some. But many people in high-tax states get no benefit from this deduction because they don’t itemize deductions or they are subject to the alternative minimum tax, which doesn’t allow it. Another group of people get little benefit because they are subject to the phaseout of all itemized deductions that kicks in at higher incomes.

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