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State, local tax deduction cap to affect 11M taxpayers, Treasury audit says

By Danielle Haynes
State, local tax deduction cap to affect 11M taxpayers, Treasury audit says
The audit said Treasury Secretary Steven Mnuchin attempted to prevent states from getting around the cap on state and local tax deductions. File Photo by Roger L. Wollenberg/UPI | License Photo

Feb. 27 (UPI) -- A cap on the amount of state and local tax deductions Americans can take on their federal tax returns will affect nearly 11 million taxpayers, a Treasury Department watchdog audit released Wednesday indicates.

The new $10,000 cap put in place by the 2017 Tax Cuts and Jobs Act will prevent the taxpayers from deducting about $323 billion in state and local tax payments, the Treasury Inspector General for Tax Administration said in its report. The audit said the new rule will primarily affect residents in high-tax states like California and in the Northeast.

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The audit detailed ways in which Treasury Secretary Steven Mnuchin attempted to block states' efforts to get around the SALT deduction cap.

The inspector general said some taxpayers affected by the cap will still see a reduction in their tax liability due to the overall tax cuts, but others may see an overall increase in their federal tax payments.

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