Senate Finance Committee member Charles Grassley, Republican of Iowa, has introduced legislation that would index certain tax benefits to adjust for inflation—including tax credits and deductions that benefit parents and students.
“The bill would ensure tax benefits afforded to families, students and others are not eroded at a time when they are seeing their paychecks shrink and costs rise due to inflation,” Grassley said in a statement.
The Family and Community Inflation Relief Act would help parents by adjusting the Child Tax Credit and the Non-Child Dependent Credit’s phase-out thresholds and credit amounts for inflation. Additionally, the bill would provide relief for college students and their parents by adjusting for inflation existing education-related tax benefits, including the American Opportunity Tax Credit, Lifetime Learning Credit, and Student Loan Interest Deduction.
To prevent adding to the deficit, Grassley said his proposal includes an extension of the current cap on the state and local tax (SALT) deduction to pay for the inflation relief. Under current law, a taxpayer may deduct up to $10,000 of any state and local taxes paid. The current SALT cap is scheduled to expire after 2025, which would allow for an unlimited SALT deduction the benefit of which would accrue mainly to wealthy taxpayers. Grassley’s provision would extend the current SALT cap for one year, a change that would be expected to offset the cost of the bill’s other provisions.
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