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Future of the SALT Limitation in Limbo
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This is the third in a series of articles for clients to keep them updated on the thinking on Capitol Hill on proposed changes so you can plan appropriately. The future of the SALT deduction limitation is uncertain and heavily dependent on the political landscape. Please contact this office with questions.The state and local tax (SALT) deduction has been a significant aspect of the U.S. tax code, allowing taxpayers to deduct certain taxes paid to state and local governments from their federal taxable income. However, the Tax Cuts and Jobs Act of 2017 (TCJA) introduced a limitation on this deduction, which has been a topic of considerable debate and discussion.The SALT deduction has historically allowed taxpayers to deduct property taxes and either income or sales taxes paid to state and local governments, with no limitation on the amount of the deduction prior to 2018. This deduction was particularly beneficial for taxpayers in states with high tax rates. However, with the passage of the TCJA in late 2017, a cap of $10,000 was placed on the SALT deduction for individuals and married couples filing jointly.The SALT deduction limitation, like many other provisions of the TCJA, is set to expire after 2025. This expiration means that unless Congress acts, the SALT deduction will revert to its pre-TCJA status, allowing taxpayers to deduct the full amount of the state and local taxes they paid each tax year when they itemize their deductions (Schedule A of Form 1040).The future of the SALT deduction limitation is uncertain and heavily dependent on the political landscape. The debate around the SALT cap is highly polarized, with some advocating for its removal to alleviate the tax burden on residents of high-tax states, while others argue that the cap should remain to prevent subsidizing high state taxes through federal tax deductions. Here are several bills that are currently pending in Congress with a wide range of options.The Securing Access to Lower Taxes by ensuring Deductibility Act (the SALT Deductibility Act) – This is a bipartisan bill which would return the SALT deduction to its pre-TCJA status, effective for 2025, allowing an unlimited deduction for itemizers.The SALT Fairness and Marriage Penalty Elimination Act (H.R. 232) which would increase the SALT deduction cap to $100,000 for single filers and $200,000 for married couples filing jointly.The SALT Fairness for Working Families Act (H.R. 246) which would increase the cap to $15,000 for single filers and $30,000 for married couples filing jointly.
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Tax and Financial Insights
by NR CPAs & Business Advisors
2026 IRS Mileage Rates: Key Updates and Insights
The IRS has rolled out the inflation-adjusted mileage rates for 2026, offering taxpayers an efficient way to claim deductions for vehicle-related expenses incurred for business, charity, medical, or moving purposes. These adjustments reflect the continued economic shifts impacting car operation costs.
Effective January 1, 2026, the new standard mileage rates are established as follows:
- Business Travel: Increased to 72.5 cents per mile, inclusive of a 35-cent-per-mile depreciation allocation. This marks a rise from the 70 cents per mile rate set for 2025
- Medical/Moving Purposes: Reduced slightly to 20.5 cents per mile, down from 21 cents in the previous year, reflecting the variable cost considerations.
- Charitable Contributions: Consistent at 14 cents per mile, a fixed rate unchanged for over a quarter-century.
As is typical, the business mileage rate considers the integral fixed and variable costs of automobile operation. Meanwhile, the medical and moving rates remain contingent on variable expenses as determined by the IRS study.
It is critical to note that the One Big Beautiful Bill Act (OBBBA) held firm on disallowing moving expense deductions except for specific cases within the Armed Forces and intelligence community, marking a substantial shift since 2017.
When engaging in charitable work, taxpayers might opt for a direct expense deduction over the per-mile method, covering gas and oil costs. However, comprehensive upkeep and insurance costs are non-deductible expenses.
Business Vehicle Use Considerations: Taxpayers can alternatively compute vehicle expenses using actual costs, which might benefit from shifting depreciation rules, particularly through bonuses and first-year advantages. Keep in mind, however, reverting from actual cost calculations to standard rates in subsequent years is restricted, particularly per vehicle protocol and when exceeding four vehicles in concurrent use.
Additionally, parking, tolls, and property taxes attributable to business can be deducted independently of the general rate, an often-overlooked advantage by many business owners.
Tax Strategies for Employers and Employees: Reimbursements based on the standard mileage framework, providing the right documentation is in place, remain tax-free for employees. Meanwhile, the elimination and continued prohibition of unreimbursed employee deductions continue, with particular exceptions offered to qualified personnel across specific occupations.
Opportunities for Self-employed Individuals: Entrepreneurs remain eligible for deductions on business-related vehicle use via Schedule C, with potential to account for business-use interest on auto loans.
Heavy SUVs and Deduction Advantages: Heavier vehicles exceeding 6,000 pounds but under 14,000 pounds open opportunities for substantial tax deductions through Section 179 and bonus depreciation avenues. The lifecycle of such a vehicle bears implications on recapturing initially claimed deductions, urging cautious tax planning.
For professional guidance on optimizing your vehicle-related tax deductions and understanding their implications on tax strategies, contact our office in Coral Gables, Florida, where expert advice and strategic insights are just a call away.
Educator's Deduction Reform: Key Changes Under OBBBA
The One Big Beautiful Bill Act (OBBBA) introduces significant enhancements for educators' tax deductions starting in 2026, offering both strategic opportunities and planning considerations for educators who qualify. With the reinstated itemized deduction for qualified unreimbursed expenses, educators have a broader spectrum of financial relief. This is complemented by the retention of the $350 above-the-line deduction, allowing educators to maximize their tax benefits by selectively allocating expenses between these avenues.
Understanding the nuances of these changes is crucial for educators and financial advisors alike. The dual-option deduction strategy can potentially enhance tax efficiency, thereby aligning with broader financial planning goals.
At NR CPAs & Business Advisors, based in Coral Gables, Florida, our expertise in tax preparation and planning provides invaluable support to educators navigating these changes. Our comprehensive approach, combined with personalized advice from our experienced team, ensures compliance and optimization in line with the latest tax legislations.
Given these updates, it is imperative to engage with seasoned professionals to fully leverage your deduction strategies. Contact us today to streamline your tax planning under OBBBA's new guidelines and maximize your deductions for upcoming tax years.
