SALT Cap of $10,000 Upheld

In the 2017 Tax Cuts and Jobs Act, Congress limited the deductibility of (1) state and local, and foreign, real property taxes; (2) state and local personal property taxes; and (3) state and local and foreign income, war profits and excess profits taxes to a cap of ten thousand dollars ($10,000) in the aggregate of such taxes ($5,000 in the case of a non-joint filer) paid during the taxable year. The states of Connecticut, Maryland, New Jersey and New York filed a federal lawsuit against the federal government alleging that the state and local tax (SALT) deduction cap was unconstitutional because it significantly impaired these four states’ abilities to pursue their own preferred tax policies. The federal district court for the Southern District Court of New York dismissed the case on the grounds that the states failed to plausibly allege that the efforts of the SALT cap were so harmful to the State’s preferred policies that it was unconstitutionally coercive by reason of the capped deduction. The case is State of New York et al. v. Steven T. Mnuchin et al., case number 1:18-cv-06427, filed in the U.S. District Court for the Southern District of New York.

*This post was originally published on October 7, 2019