California SALT Cap Workaround Changes Increase Its Appeal (1)

California’s optional workaround for the federal cap on state and local tax deductions is much more likely to attract participants now that it has been expanded.

Lawmakers removed the largest barriers to participation in the workaround for S corporations and partnerships, first enacted in 2021, with a bill Gov. Gavin Newsom (D) signed last week (S.B. 113), practitioners said.

California’s expansion comes as talks in Congress to increase or remove the $10,000 cap have faltered. More than 20 states have enacted workarounds that vary in details but hinge on pass-through entities with a strategy blessed by ...