This bill amends the Internal Revenue Code to eliminate the marriage penalty in the state and local tax (SALT) deduction by establishing equitable deduction limits and income thresholds based on filing status.
Josh Gottheimer
Representative
NJ-5
This bill amends the Internal Revenue Code to eliminate the marriage penalty within the state and local tax (SALT) deduction. Beginning in 2027, it establishes new, higher deduction limits and income phase-out thresholds tailored to filing status, ensuring married couples filing jointly receive double the deduction capacity of single filers. These limits and thresholds will be adjusted annually for inflation to maintain consistent tax treatment.
New Tax Bill Sets $80,800 SALT Deduction Limit for Married Couples Starting in 2027
If you’ve ever felt like the tax code was punishing you for saying 'I do,' this one is for you. Currently, the State and Local Tax (SALT) deduction is capped at $10,000, and it doesn’t matter if you’re single or a married couple—the ceiling stays the same. This bill aims to overhaul that starting in the 2027 tax year by essentially doubling the limit for couples filing jointly to $80,800, while single filers would see their cap rise to $40,400. It’s a massive jump from the current 'marriage penalty' setup where two single people get more total deduction room than one married couple.
The Marriage Bonus
Under this plan, the math becomes much friendlier for families in high-tax states. For example, if you and your spouse are both working professionals in a place like New Jersey or California, you might easily pay over $20,000 in property and state income taxes. Right now, you can only write off $10,000 of that. Under the new rules in Section 1, that same couple could deduct up to $80,800. The bill even builds in a safety net for your raises: the deduction only starts to disappear (or 'phase out') once a married couple’s modified adjusted gross income hits a whopping $1,010,000. For single filers, that threshold is set at $505,000.
The Fine Print for Separate Filers
While the bill looks like a win for most couples, there is a specific group that might feel a bit of a squeeze. If you are married but choose to file separately—perhaps because of student loan repayment plans or other complex financial reasons—your deduction limit is capped at $20,200, with a phase-out starting at $252,500. This is exactly half of the joint filing amount, but it’s notably lower than what a single person gets. It effectively creates a new kind of 'filing penalty' for married people who don't want to combine their tax returns.
Future-Proofing the Numbers
One of the smarter moves in this legislation is the inclusion of automatic inflation adjustments. Instead of these numbers sitting stagnant for a decade while the cost of living climbs, the bill requires the IRS to recalculate the limits and income thresholds every year. This means if inflation spikes, your $80,800 deduction limit will grow along with it, ensuring the tax break doesn't lose its punch over time. It’s a technical detail that prevents the 'bracket creep' that often eats away at middle-class tax benefits.