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Spotlight on the SALT Deduction Cap

Written on Nov 12, 2021

On Oct. 26, OSCPA provided proponent testimony to the Ohio Senate Ways and Means Committee in support of Senate Bill 246, which would authorize a pass-through entity (PTE) owner to claim a refundable credit against the owner’s Ohio income tax liability equal to the owner’s proportionate share of the tax paid by the PTE.  

States have been permitted to enact legislation to clarify that taxes paid by a PTE do not count towards an owner’s $10,000 state and local tax limitation deduction for federal income tax purposes since IRS Notice 2020-75 was issued in November 2020. 

The Society’s State and Local Tax Committee is also reviewing proposals to address the interplay of the resident credit for multistate pass-through entities and similar work-arounds provided by other states. 

While these efforts are occurring at the state level, the federal government is also debating changes to the original cap. The most recent Congressional proposal would lift the SALT cap to $80,000 for nine years through 2030, and the $10,000 limit would return in 2031, according to the amendment. This is a $7,500 increase from House Democrats’ previous SALT relief proposal, which raised the cap to $72,500, but also is a one-year term decrease from ten years. 

However, Senate Budget Chairman Bernie Sanders has floated a separate plan to keep the $10,000 ceiling in place but exempt households making up to somewhere between $400,000 and $550,000 a year. 

Please stay tuned to OSCPA news for any developments on this issue.