The Supreme Court has refused to step into the battle over the cap on SALT deductions. Several states sued to lift the cap on state and local tax deductions but the high court refused to hear the case. That leaves the matter up to Congress which hasn’t produced results so far, or to the states which in some cases have offered a work-around.Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.The $10,000 cap on SALT deductions was one of the most controversial parts of the 2017 tax bill. Those deductions cover state sales, income, and property tax. Once upon a time, they were unlimited. The Tax Cut and Jobs Act or TCJA was passed by a Republican-controlled Congress under President Trump and provided $1.5 trillion in tax cuts. (1) The low cap on the SALT deduction helped offset that lost tax revenue, along with a lower cap on the mortgage interest deduction. A higher individual tax deduction was also offered as partial compensation for the loss of those tax-saving strategies.SALT Cap Hit “Blue” States the HardestThe SALT deduction hit some states harder than others, particularly those with high priced homes and high tax rates. They were also states that were mostly “blue” or Democratic. New York is one of those states. As reported by the New York Times, it was estimated that the cap would force New York taxpayers to pay an additional $121 billion in federal taxes from 2018 through 2025, when the provision expires. (2)New York led the legal battle against the cap by filing a lawsuit in 2019. The states of Maryland, Connecticut, and New Jersey also joined the lawsuit. The case was dismissed by a District Court in New York, and was then dismissed on appeal. Appeals Court Ruling on SALTThe appeals court ruling found that Congress had the power to impose the SALT cap. In the ruling it wrote: “It is obviously true that members of Congress were aware that the SALT deduction cap would adversely affect some states more than others. But the SALT deduction cap is not unlike the countless federal laws whose benefits and burdens are unevenly distributed across the country.”A few days ago, the case made its way to the Supreme Court but the high court rejected the case which leaves the rule intact until the 2025 expiration – unless it is modified or extended.Democrats claim the 2017 law is an unconstitutional infringement on their sovereignty by Republicans who were targeting blue states. And, New York Governor Kathy Hochul has expressed disappointment with the Supreme Court decision. She wants Democrats in Congress to undo what she calls “an economic attack” on middle-class families by restoring the SALT deduction.Debate Over the SALT DeductionThere is debate on whether it should be restored, even among Democrats. As reported by the Times, some of the more progressive Democrats in Congress feel that getting rid of the cap would only benefit wealthy Americans, and not the middle-class. Moderate Democrats would like the cap scrapped for the benefit of their wealthier constituents.There’s also another issue involved with scrapping the SALT cap. In addition to imposing the cap, the 2017 tax bill eliminated two other provisions that helped moderate SALT deductions – namely, the individual alternative minimum tax or AMT and the PEASE limitation.If the SALT cap is lifted without reinstating those two provisions, the value of the tax deductions would be much higher than they were prior to the 2017 tax bill. According to the Tax Foundation, the Pease limitation capped deductions at 80%, including SALT deductions, for high-income taxpayers. If the alternative minimum tax applies to a taxpayer, the SALT deduction is eliminated altogether. (3)The Tax Foundation says that repealing the SALT cap in 2022 would give a 2.8% bump to the after-tax income for the top 1% of taxpayers, and a 1.2% bump to the top 2 to 5%. You can dive into the details at the Tax Foundation website. We’ll ha