Inflation Is Making the SALT Deduction Less Sweet
The standard deduction goes up as prices rise. The $10,000 cap on deducting state-and-local taxes doesn’t.
Meanwhile, back in the arena ...
Photographer: Sarah Silbiger//BloombergAs Democrats haggle over the future of the controversial state and local tax deduction, it's worth remembering that the current cap of $10,000 isn't adjusted for inflation.
That was by design when Republicans rewrote the tax rules in 2017 and removed what had previously been an unlimited SALT deduction. And it wasn’t a novel move; there are other deductions and credits in the tax code that don't take inflation into account. For example, the deduction taxpayers are allowed to take for the mortgage interest they pay is also capped at a non-inflation-adjusted amount for debt up to $750,000. And the amount of stock losses a taxpayer can deduct against ordinary income has been set at $3,000 for at least four decades.