House May Increase State Tax Deduction Cap; Senate Approval Unlikely

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House Democrats are likely to vote before year end on a bill increasing the $10,000 cap on the state and local tax (SALT) federal deduction. The cap was added to the tax code by the Tax Cuts and Job Act (TCJA), enacted in December 2017. The exact SALT cap in the bill is not yet determined but lawmakers estimate it will be between $15,000 and $30,000.

 

The same bill would increase the top federal tax bracket on individuals to 39.6%, the rate that applied before TCJA reduced it to 37% for 2018. This would fast-track a return to the old top rate, scheduled to come back in 2026 under current law.

 

Although the Democratic-controlled House may approve these measures if they come to a vote, they are unlikely to pass in the Republican-controlled Senate.

 

IRS National Tax Security Awareness Week

 

The IRS published daily cybersecurity alerts during the week of December 2, dubbed National Tax Security Awareness Week. Besides warning of purely tax-related scams, such as phishing telephone calls purporting to be from the IRS, the agency urged taxpayers to be vigilant in general with all sensitive tax and financial data since criminals can use a variety of information to file fraudulent tax returns.

 

On Cyber Monday, the IRS provided tips everyone should take when shopping on their computers and mobile devices. Suggestions included using sites with web addresses beginning with "https," avoiding the use of sensitive information on unsecured wi-fi networks at restaurants, malls, and the like, learning to recognize and avoid phishing scams, and using strong and unique passwords.

 

On Tuesday the IRS expanded on the phishing issue, cautioning taxpayers to be alert to imposter emails and texts as well as phone calls. "This is the season of giving," warned IRS Commissioner Chuck Rettig, "but be careful and don't give your sensitive financial or tax information to an identity thief."  The "bait" may pose as a trusted organization, such as in recent letters purporting to be from the IRS itself which demanded payment of overdue tax bills.

 

Later in the week, the IRS provided specific tips taxpayer can use keep passwords strong and secure, and provided information targeted to business owners. It summarized many of its cybersecurity suggestions in a one-page Security Awareness for Taxpayers publication.

 

Contact your LMC professional if you receive a tax-related communication from the government, especially one that is unexpected or suspicious. All our prior Alerts are available on the Updates page of our website

 

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