SURPRISE TAX BREAK IN NEW RELIEF BILL
Surprise tax break in new relief bill. The coronavirus pandemic has brought the global economy to its knees, and lawmakers in Washington are pulling out all the stops to find ways to support hard hit Americans. Even after three rounds of legislation to stimulate the U.S. economy, there’s been discussion of still more proposals to get money where people need it the most. ON May 12th, House Democrats released a massive stimulus proposal, dubbed the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act for short. Indeed, the proposal was massive not only it its $3 trillion cost but also in its size, with more than 1,800 pages included in the bill. Most of those covering the bill paid the closest attention to provisions calling for another round of stimulus payments extended unemployment benefits, and other direct financial assistance. However, on page 224 of the 1,815 page bill, lawmakers included an interesting provision that revisits a hard fought issue for those in many high tax states. Surprise tax break in new relief bill.
Section 20161 of the HEROES Act is a rare instance in tax law where the title of the section tells you exactly what the provision does. Under that section, the HEROES Act would eliminate the limitation on itemized deductions for state and local taxes (SALT) for the 2020 and 2021 tax years. The provision revisits an old battle that lawmakers fought during the tax reform efforts in late 2017 and early 2018. Prior to tax reform, taxpayers could deduct in full their state and local property taxes, as well as choose between adding either state or local income taxes or sales taxes. Tax reform imposed a new $10,000 limit on the amount of state and local taxes one could deduct. Combined with a big increase in the standard deduction, the SALT deduction limitations led to a big drop in the number of taxpayers who itemize. With roughly 60% to 65% fewer people claiming the state and local tax deduction, tax filing became simple but it added thousands of dollars to the tax bills of millions of Americans, multiplying the number of Americans who need tax resolution services.