Restoring Tax Fairness for States and Localities Act

To amend the Internal Revenue Code of 1986 to modify the limitation on deduction of State and local taxes, and for other purposes. 1. Short title This Act may be cited as the Restoring Tax Fairness for States and Localities Act 2. Elimination for 2019 of marriage penalty in limitation on deduction of State and local taxes (a) In general Section 164(b) (7) Special rule for limitation on individual deductions for 2019 In the case of a taxable year beginning after December 31, 2018, and before January 1, 2020, if the adjusted gross income of the taxpayer for such taxable year does not exceed $100,000,000, paragraph (6) shall be applied by substituting ($20,000 in the case of a joint return) ($5,000 in the case of a married individual filing a separate return) . (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2018. 3. Elimination for 2020 and 2021 of limitation on deduction of State and local taxes (a) In general Section 164(b) (8) Suspension of dollar limitation on State and local taxes for 2020 and 2021 (A) In general In the case of any taxable year beginning in 2020 or 2021, subparagraph (B) of paragraph (6) shall not apply. (B) Exception for certain high-income taxpayers Subparagraph (A) shall not apply to any taxpayer for any taxable year if the adjusted gross income of such taxpayer for such taxable year exceeds $100,000,000. . (b) Conforming amendments Section 164(b)(6) (1) by striking For purposes of subparagraph (B) For purposes of this section (2) by striking January 1, 2018 January 1, 2022 (3) by striking December 31, 2017, shall December 31, 2021, shall (4) by adding at the end the following: For purposes of this section, in the case of State or local taxes with respect to any real or personal property paid during a taxable year beginning in 2020 or 2021, the Secretary shall prescribe rules which treat all or a portion of such taxes as paid in a taxable year or years other than the taxable year in which actually paid as necessary or appropriate to prevent the avoidance of the limitations of this subsection. (c) Effective date The amendments made by this section shall apply to taxes paid or accrued in taxable years beginning after December 31, 2019. 4. Increase in deduction for certain expenses of elementary and secondary school teachers (a) Increase Section 62(a)(2)(D) $250 $1,000 (b) Conforming amendments Section 62(d)(3) (1) by striking 2015 2019 (2) by striking $250 $1,000 (3) in subparagraph (B), by striking 2014 2018 (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2018. 5. Above-the-line deduction allowed for certain expenses of first responders (a) In general Section 62(a)(2) (F) Certain expenses of first responders The deductions allowed by section 162 which consist of expenses, not in excess of $1,000, paid or incurred by a first responder— (i) as tuition or fees for the participation of the first responder in professional development courses related to service as a first responder; or (ii) for uniforms used by the first responder in service as a first responder. . (b) First responder defined Section 62(d) (4) First responder For purposes of subsection (a)(2)(F), the term first responder . (c) Inflation adjustment Section 62(d)(3) the $1,000 amount in subsection (a)(2)(D) the $1,000 amount in each of subparagraphs (D) and (F) of subsection (a)(2) (d) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2019. 6. Increase of top marginal individual income tax rate under temporary rules (a) In general The tables contained in subparagraphs (A), (B), (C), (D), and (E) of section 1(j)(2) 37% 39.6% (1) in subparagraph (A)— (A) by striking $600,000 $479,000 (B) by striking $161,379 $119,029 (2) in subparagraph (B)— (A) by striking $500,000 $452,400 (B) by striking $149,298 $132,638 (3) in subparagraph (C)— (A) by striking $500,000 $425,800 (B) by striking $150,689.50 $124,719.50 (4) in subparagraph (D)— (A) by striking $300,000 $239,500 (B) by striking $80,689.50 $59,514.50 (b) Conforming amendments (1) Section 1(j)(4)(B)(iii) (A) in the matter preceding subclause (I), by striking 37 percent 39.6 percent (B) in subclause (II), by striking 37-percent bracket 39.6-percent bracket (C) in the heading, by striking 37 39.6 (2) Section 1(j)(4)(C) of such Code is amended— (A) in clause (i)(II), by striking paragraph (5)(B)(i)(IV) paragraph (5)(B)(iv) (B) by amending clause (ii) to read as follows: (ii) the amount which would (without regard to this paragraph) be taxed at a rate below 39.6 percent shall not be more than the sum of— (I) the earned taxable income of such child, plus (II) the maximum dollar amount for the 35-percent rate bracket for estates and trusts. . (3) The heading of section 1(j)(5) of such Code is amended to read as follows: Application of zero percent capital gain rate brackets (4) Subparagraphs (A) and (B) of section 1(j)(5) of such Code are amended to read as follows: (A) In general Subsection (h)(1)(B)(i) shall be applied by substituting below the maximum zero rate amount which would (without regard to this paragraph) be taxed at a rate below 25 percent (B) Maximum zero rate amount defined For purposes of subparagraph (A), the term maximum zero rate amount (i) in the case of a joint return or surviving spouse, $77,200; (ii) in the case of an individual who is a head of household (as defined in section 2(b)), $51,700; (iii) in the case of any other individual (other than an estate or trust), an amount equal to ½ of the amount in effect for the taxable year under clause (i); and (iv) in the case of an estate or trust, $2,600. . (5) Section 1(j)(5)(C) of such Code is amended by striking clauses (i) and (ii) of (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2019. (d) Section 15 not To apply Section 15

Summary: Restoring Tax Fairness for States and Localities Act This bill increases the tax deduction for state and local taxes in 2019 to $20,000 for persons filing a joint tax return. It eliminates the current $10,000 cap on the deduction in 2020 and 2021. The bill increases the top marginal income tax rate to 39.6% beginning in 2020, and reduces the dollar amount at which the increased tax rate begins.