Will the Biggest Itemized Tax Deduction Disappear Next Year?
Based on information released by President Trump's administration and the GOP as a whole, the state and local taxes deduction may no longer exist once tax reform takes effect (which could happen as soon as next year). Republicans argue that substituting a larger standard deduction for many of the itemized deductions -- including this one -- would simplify tax preparation without costing taxpayers more. But for some taxpayers, losing the SALT deduction would result in a significantly higher tax bill.
The state and local taxes deduction allows you to deduct the cost of any non-federal taxes that you paid during the year. You can choose to deduct either your state income taxes or your state sales taxes, plus any other state and local taxes you paid.
The idea behind the SALT deduction is that it's unfair to pay taxes on your taxes. In other words, let's say you paid your state $2,000 in income taxes. Being able to deduct that $2,000 from your federal taxes means that you won't have to pay federal income taxes on it. Without the SALT deduction, you would have to pay what amounts to double taxation on some of your income.
Source: Fool.com
