This week, the House of Representatives broke a legislative logjam by passing a long-shot bipartisan tax bill containing several real estate provisions and also greasing the wheels of a long-stalled vote to increase the $10,000 limit on the deduction of state and local taxes (SALT). Despite this positive news, the road to enactment for both measures is rocky and far from assured.
By a vote of 357-70, the House approved the Tax Relief for American Families and Workers Act (H.R. 7024) on January 31, sending it to the U.S. Senate. The bill was the result of an unusual election year bipartisan agreement between Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Chair Jason Smith (R-MO).
While the centerpiece of this legislation is the extension and expansion of several business-related tax incentives and of the child credit, the bill also includes the following pro-real estate provisions:
- Expansion of the Low-Income Housing Credit
- Restoration of deduction of personal casualty losses outside of federally declared disasters
- Extension of 100% bonus depreciation of certain business assets
- Increase in limits on expensing depreciable business assets
- Easing of limits on deducting interest expense for larger real estate businesses
The $77 billion package now heads to the Senate where the bipartisanship that made the strong House vote possible appears to be missing. Many Senate Republicans have lambasted the bill and are insisting on major changes in the child credit provisions. The Senate’s rules for processing legislation also cast dark clouds on the future of the legislation. Most bills must receive the support of at least 60 senators to move through the chamber, yet the Wyden-Smith compromise doesn’t seem to be catching hold on this side of the Capitol. This could change but the outlook now appears cloudy at best.
Action on SALT Cap
The morning after the House passed the larger tax bill, House Speaker Mike Johnson (R-LA) sent another tax bill that would increase the limitation on state and local taxes (SALT) to the House Rules Committee, where it passed with a vote of 8-5. This is a necessary step before the legislation can be brought to the House floor for a vote.
The SALT Marriage Penalty Elimination Act (H.R. 7160) is limited in that it would increase the current-law maximum SALT deduction for couples filing a joint tax return from $10,000 to $20,000 for 2023 only. The increase, which would eliminate the current-law marriage penalty in the SALT deduction, is available for couples with adjusted gross incomes below $500,000.
The SALT deduction limit has been a political hot potato since it was enacted in 2017, and while this limited relief is viewed by many lawmakers as a positive step, the complicated politics of this issue make it difficult to predict whether this bill can pass the House or the Senate.