NACo Releases new SALT deduction data for 2022 showing why relief is necessary

Key Takeaways

On June 11, NACo released profiles of the State and Local Tax deduction, illustrating the percentage of tax returns in a county with itemized deductions in 2022. This county-by-county map is released as the urgent issue of SALT takes the national stage. The $10,000 SALT cap is set to expire December 31, 2025, and the U.S. House-passed reconciliation bill would raise the cap to $40,000. While raising the SALT cap is a great first step to restoring our federalist tax code, counties urge Congress and the Administration to restore the full SALT deduction to restore fairness in taxation and preserve essential local services. 

Explore how the SALT cap impacts your county here

What is the State and Local Tax (SALT) deduction? 

The SALT deduction allows taxpayers to deduct state and local taxes from federal taxes, promoting the intergovernmental balance of taxation. Since the first Federal Income Tax Form in 1913, SALT has been a founding principle to Federalism and intergovernmental roles. The 2017 Tax Cuts and Jobs Act (P.L. 115-97) capped the State and Local Tax (SALT) deduction at $10,000, ending the full deductibility of state and local taxes from federal taxes. Counties opposed this portion of the tax reform law and have been advocating to fully restore the SALT deduction ever since. 

Where does the SALT deduction stand today? 

The $10,000 SALT cap is set to expire December 31, 2025, and the U.S. House-passed reconciliation bill would raise the cap to $40,000 making under $500,000 in modified adjusted gross income per year. Under the House’s bill, the SALT deduction would be limited to $20,000 for married individuals filing separate tax returns who make under $250,000 in modified adjusted gross income per year. 

The bill is now under consideration in the U.S. Senate where we expect several changes to be made to the House-passed bill, including to the expanded SALT deduction. The U.S. House will need to consider and approve any changes made in the U.S. Senate and it remains unclear whether changes to the expanded SALT proposal will clear the chamber.

How does the SALT deduction impact counties? 

Restoring the full SALT deduction is strongly tied to NACo’s long-standing national goal of promoting home ownership, as the overwhelming number of itemizers who claim SALT deduct property taxes and mortgage interest. With the current cap, homeowners are disadvantaged as landlords and certain corporations continue to fully deduct state and local taxes, including property taxes, as a business expense. With the current housing affordability crisis, counties call upon Congress to restore the full SALT deduction for all state and local taxpayers. To see a full list of county tax priorities in the 119th Congress, visit NACo’s Advocacy Toolkit. 

Advocacy Toolkit: Counties and Tax Reform in the 119th Congress 

Advocacy Toolkit: Municipal Bonds