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'The SALT cap can be lifted or certainly increased without any Republican votes at all,' CPA says

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Dan Geltrude, CPA at Geltrude & Company, joined Yahoo Finance to discuss the politics surrounding the SALT cap and other issues that affect homeowners.

Video Transcript

- We want to turn our attention now to the D.C. Market, where President Biden's Build Back Better Plan hangs in limbo, even as a $550 billion infrastructure bill is set to get inked this Monday and become law. At issue in part, is a cap, that they have for deductions for state and local taxes, or also called SALT, which is holding up votes in key states. Our next guest has the details. And as part of our series looking at the state of home buying, brought to you by Veterans United Home Loans, we now welcome Dan Geltrude, CPA of Geltrude & Company, into the stream.

And Dan, help break this down for us. This is a pretty controversial issue near and dear to people in New York, who pay a lot of high state and local taxes here. Could this actually bring this bill to its knees, the process?

DAN GELTRUDE: Yes, it absolutely could. When you're talking about the vote being so close, both in the House and in the Senate, every single vote matters. And you have states, as you alluded to, like New York, and also New Jersey and California, which have very high state and local taxes. They are not willing to sign off on this Build Back Better Program, unless that cap, which is currently at $10,000 is either removed or substantially increased.

Now, of course, all these details are being worked out. The last I had heard the number was about $80,000 as a cap. But of course, there's another side to this. There are also representatives from states that are either low tax or no tax, who feel that this is a federal subsidy for states that are literally spending and taxing too much. And therefore, because they believe this is a federal subsidy which they are contributing to, but consider themselves to be fiscally responsible, they don't want to give in to a change in the SALT. They feel that the SALT cap was put on place to force certain states to be more fiscally responsible.

- Is there any way, where I don't know, somebody in the House or the Senate, they can whip the votes and just get it done, even if a lot of the Republicans don't sign on to it, necessarily?

DAN GELTRUDE: Well the SALT cap can be lifted or certainly increased without any Republican votes at all. The problem is is that there are probably going to be some Democrats who are from lower tax states who don't want to give in to this. So, again, it's a push and pull. And this is quite common, especially when you have bills as large as this bill is.

And remember, when you go back to the Tax Cut and Jobs Act, the standard deduction was increased dramatically. And, it really made the vast majority of Americans not have to itemize your deductions anymore. So, that created, you know, a lot of benefit for people. Now, if you go back and put SALT in the way it was prior, what ends up happening? Well, that is going to take away from the tax revenue that's generated, or needed to be generated, in order to pay for Build Back Better.

So, again, there are representatives that say, well, if we put the SALT back in, we have to take something else out. And, of course, people may be for that. But, not the program I want. So, you know, it's kind of like, not in my backyard.

So, I think that's what we have going back and forth. But, I'll predict this Jared. If SALT is not changed, there will be no Build Back Better bill, or law.

- Got it. Got it there. Might have to bring you back to see if that actually comes true. But, we got time-- a quick one for one more. You mentioned the Tax Cuts and Jobs Act and the elimination of deductions. But, I understand according to your notes, you can still get deductions related to selling your home. What are the details there?

DAN GELTRUDE: Yeah, you can because there are costs related to selling your principal residence. Let's be clear about that. Various selling costs for brokers and staging. Those things can be deducted, and what they do is they ultimately reduce the gain. They reduce the selling price for which you would ultimately potentially pay capital gains on.

The same thing is true with home improvements and repairs that you make to your principal residence. Now, timing is important there. If you make those improvements or repairs within 90 days of the sale of the home, you can do the same thing. You could have the chance to lower your capital gain and the corresponding tax. Real estate tax is mortgage interest. Up until the time that you sell your home, you can take those deductions. Please be aware of that.

And, finally, keep in mind, the capital gains tax on your principal residence you can get up to 250,000 if you're single. 500,000 if you are married of an exclusion of that capital gains tax. So, keep that in mind when you're selling your home.

- I will. I just got to get a home first to sell. But, all this talk about SALT just reminds me, Roman soldiers back in the day paid in salt. You've got to wonder what was behind that trade at the time. Well, Dan Geltrude, CPA. Thank you for joining us here of Geltrude & Company.