Wow, if I'm reading this correctly, the Big Beautiful Bill introduced a pretty large gap that punishes married couples filing jointly: a couple making about $300K each can lose up to $15K in write-offs compared with filing separately, pretty much everywhere except the nine states with no broad income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming), where few couples pay the $25K in state and local taxes needed to trigger it. I think most tax software will assume the $5K cap each, but the regulation here is inconsistent. Here’s the take-away quote from the article:
“A married couple can deduct more state and local tax by filing separately. The deduction for state and local taxes (SALT) is capped, and the cap shrinks as income rises: by 30 cents for each dollar over $500,000 on a joint return. On a separate return, the law halves the cap after shrinking it, so it shrinks by only 15 cents a dollar. A couple earning $300,000 each can deduct up to $25,000 on two separate returns, but only $10,000 on one joint return.”
This is non-trivial impact to joint returns if this is true, and I won’t be surprised if there are multiple appeals for refunds and more people filling separately going towards.
“A married couple can deduct more state and local tax by filing separately. The deduction for state and local taxes (SALT) is capped, and the cap shrinks as income rises: by 30 cents for each dollar over $500,000 on a joint return. On a separate return, the law halves the cap after shrinking it, so it shrinks by only 15 cents a dollar. A couple earning $300,000 each can deduct up to $25,000 on two separate returns, but only $10,000 on one joint return.”
This is non-trivial impact to joint returns if this is true, and I won’t be surprised if there are multiple appeals for refunds and more people filling separately going towards.