Supreme Court rejects SALT cap challenge that limits tax deductions in New York

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The Supreme Court Monday rejected an appeal from several states challenging Congress's cap on state and local taxes that can be deducted from federal taxable income.

New York led a group including Connecticut, New Jersey, and Maryland in trying to strike down the 2017 limit known as the SALT cap, which limits people to $10,000 of their state and local property and income taxes that can be deducted. The states argued that the cap improperly encroached on states' taxing ability.

"Congress’s taxing authority is cabined by the structural requirements of federalism, which prevent the federal government from directly interfering with the States’ ability to generate revenue to sustain their operations," the states said in a March court filing.

The current Democrat-controlled House passed a bill in 2021 that would temporarily raise the cap to $80,000 until 2031, when it would go back to $10,000. The Senate has yet to take action on the bill, although a separate plan in the Senate led by Sen. Bernie Sanders, I-Vt., would cap the tax break by income, making it unlimited for individuals earning about $400,000 and phasing it down above that amount,.

 

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