A federal income tax limit of $10,000 on deductions for state and local property taxes — of particular interest to New Jersey residents with high tax bills — will expire at year’s end, leaving the White House and members of Congress gauging what to do next.
Some Democrats have proposed scrapping the limit entirely so taxpayers can deduct their full state and local tax bills that total more than $10,000, while Republicans and other Democrats have floated increasing the property tax deduction limit to some amount above $10,000.
One proposal by Stephen Moore, President Donald Trump’s chief economic adviser, would double the limit to as much as $20,000.
“If it gets lifted to $20,000, that’s really going to be inclusive to a lot more places,” said Marc Pfeiffer, a senior policy fellow at Rutgers University’s Bloustein School of Planning and Public Policy, who studies local government in New Jersey…
Pfeiffer said that many of these affluent North Jersey suburbs lack commercial properties such as office parks or shopping plazas that could provide taxable income, so the high property taxes on individual homes make up a larger share of those towns’ income.
“If you’re wealthy and you got kids, you’re going to most likely go to a place that has property taxes” for services such as higher quality schools, Pfeiffer said.
An increase of the SALT cap from $10,000 to $20,000 would cost the U.S government $22 billion over 10 years, according to the University of Pennsylvania’s Wharton School. That assumes the $20,000 deduction is limited to married filers making up to $500,000 a year.