A federal income tax limit of $10,000 on deductions for state and local property taxes is set to expire at the end of the year. This development is particularly significant for New Jersey residents who face high tax bills. The White House and Congress are currently considering their next steps.
Some Democrats have suggested eliminating the cap entirely, allowing taxpayers to deduct their full state and local tax bills that exceed $10,000. Meanwhile, Republicans and some Democrats are considering raising the deduction limit above $10,000.
Stephen Moore, President Donald Trump’s chief economic adviser, has proposed a plan to double the limit to as much as $20,000. Marc Pfeiffer from Rutgers University’s Bloustein School of Planning and Public Policy commented on this proposal: “If it gets lifted to $20,000, that’s really going to be inclusive to a lot more places.”
Pfeiffer explained that many affluent suburbs in North Jersey lack commercial properties like office parks or shopping plazas that could generate taxable income. As a result, high property taxes on individual homes constitute a larger portion of these towns' revenue. He added, “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.
According to the University of Pennsylvania’s Wharton School, increasing the SALT cap from $10,000 to $20,000 would cost the U.S government $22 billion over 10 years. This estimate assumes that the $20,000 deduction would be limited to married filers earning up to $500,000 annually.
