The Tax Cuts and Jobs Act (TCJA) capped the SALT deduction at $10,000 for married couples and $5,000 for individuals, while the OBBBA raised the cap to $40,000 and $20,000 respectively. This cap raises taxes more for residents in high-tax states, where Democrats tend to win elections. The TCJA also doubled the standard deduction, helping offset the SALT cap to some extent. The OBBBA makes the higher standard deduction permanent and increases its limits slightly, although its benefits may not fully compensate wealthy taxpayers impacted by the SALT cap.
The TCJA capped the SALT deduction at $10,000 for married couples and $5,000 for individuals, while the OBBBA raised the cap to $40,000 and $20,000 respectively.
The SALT deduction impacts taxpayers unequally, affecting predominantly those in high-tax states, which tend to lean Democratic, with top states being Connecticut, New York, and New Jersey.
Despite a higher standard deduction provided by the TCJA, wealthy taxpayers in high-tax states find their tax burdens increased due to the SALT cap, potentially offsetting benefits.
The OBBBA makes the raised standard deduction permanent and slightly increases it to $15,750 for individuals and $31,500 for couples, reflecting ongoing changes in tax policy.
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