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NJ taxpayers eye SALT tax deduction

Wonder what Trump will do to the limit

By: Daniel Munoz
NorthJersey.com
USA Today Network - New Jersey

..... 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, [2025] leaving the White House and members of Congress gauging what to do next.
..... Some Democrats have proposed scraping 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 lint 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.
..... In his first term. Trump signed a sweeping 2017 tax law that put a limit on SALT deductions of $10,000, which critics say targeted Democratic-leaning states with high sate income and property taxes, including New Jersey, New York, Connecticut and California.
..... But on the presidential campaign trial Trump seemed to reverse course.
..... "I will turn it around, get SALT back, lower your taxes, and so much more," Trump said on his social media platform, Truth Social.
..... A full repeal would be too expensive, Moore said, as reported by Bloomberg in December, [2024] while a $20,000 cap would help middle class families.
..... "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 Bloustent School of Planning and Public Policy, who studies local government in New Jersey.
..... The SALT deduction lets people reduce the amount of their annual income that can be taxed by the federal government by subtracting how much they pay in state income taxes and local property taxes. The deduction has existed since 1913, the Congressional Research Service said.
..... In many cases, the property tax bills in North Jersey are much higher than the current $10,000 deduction limit, according to figures from the New Jersey Department of Community affairs.
..... Here is the breakdown of the average property tax bill across North Jersey's counties for 2023:
* Bergen County: $12,856
* Essex County: !3,448
* Morris County: $11,599
* Passaic County: $10,923
* Sussex County: $8,451
..... The statewide property tax average was $9,803 in 2023, state figures show.
..... Some communities had average annual property tax bills above $20,000 in 2023, such as Millburn in Essex County at $24,497, Demarest in Bergen County at $23,475 and Tenafly at $23,031.
..... Property tax numbers for 2024 for the state, counties and local towns have not yet been made available.
..... 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.

What comes after the cap expires?

..... Republicans are racing to extend a slew of 2017 tax cuts slated to expire at the end of the year, [2025] including the SALT deduction cap.
..... Democrats, such as Representative Josh Gottheimer -a candidate for New Jersey governor whose North Jersey affluent and high-tax New Jersey communities - has proposed entirely repealing the cap. The Wharton School projected a $197 billion price tag for such a proposal.
..... "If you cap the SALT deduction at what it is now, and your property taxes and your income taxes are higher then $10,000 then what happens is you're getting taxed twice on the same income," Gottheimer said in a November [2024] interview after the election.
..... Representative Mikie Sherrill, another Democrat running for New Jersey governor, proposed repealing the SALT cap for "99% of families," with a deduction raised to $100,000 for single filers or $200,000 for married couples filing jointly. The Wharton School projected a $134 billion price tag for such a proposal.
..... New Jersey's Congressional Republicans have also proposed raising, but not repealing, the cap.
..... "While I agree that we cannot have a system offering tax deductions in the hundreds of thousands of dollars annually, we can adjust the current caps to a more reasonable level," Representative Jeff Van Drew, a Republican from South Jersey, said last month. [02/2025]
..... Representative Tom Kean Jr., a Republican who represents another affluent part of the state, said during his reelection party in November [2024] he would not support a tax plan that did not include "SALT restoration." He said in an emailed statement Tuesday [02/18/2025] that he wants "full restoration of the SALT deduction."

SALT deduction: Tax relief of a tax break for the wealthy?

..... Progressives, including Sean tor Bernie Sanders, A Vermont independent who caucuses with Democrats, have decried the SALT deduction as a tax break for the wealthy.
..... Most of the tax relief from lifting the SALT cap, for instance, would go to households earning between $200,000 and $500,000, according to a report last February [2024] from the Tax Foundation, a center-right think tank in New York City.
..... The nonpartisan Committee for a Responsible Federal Budget said the proposed repeal of the $10,000 SALT cap "would be costly, discretionary, and regressive."
..... "Most households don't have $10,000 in state and local taxes," said Peter Chen, an analyst with the progressive think tank New Jersey policy Perspective. "When you think about who's going to benefit the most from lifting the cap, it's the people who are in the highest income bracket."
..... Defenders of the SALT deduction argue that most of those who benefit are middle-income homeowners, even if the largest individual savings would go to the wealthy.
..... New Jersey's average SALT deduction in 2016 was just over $18,000, and the largest group filing a claim earned between $100,000 and $200,000 a year, according to a National Association of Realtors report. That group on average has a SALT deduction of $15,003.
..... Those who earned $1 million or more had an average SALT deduction of $307,736. And the progressive Institute on Taxation and Economic Policy said in 2021 that 80% of the 1.9 million New Jersey residents who would see a benefit from a removal of the cap had average incomes of up to $216,000.
..... Most of the tax increases from restricting the SALT deduction affected "cops, firefighters and teachers," Gottheimer said in an interview last year. [2024]
..... "This is a middle-class issue," he added.

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