Local Infrastructure Tax Cuts Act

Section 164(b)(7) of the Internal Revenue Code of 1986 is amended to read as follows:

For purposes of this subsection, the term applicable limitation amount means—

(i) $0 in the case of any taxpayer whose modified adjusted gross income exceeds the threshold amount,

(ii) $5,000 in the case of a married individual filing a separate return, and

(iii) $10,000 in the case of any taxpayer not described in clause (i) or (ii).

For purposes of this paragraph, the threshold amount shall be—

(i) in the case of a joint return, $215,000,

(ii) in the case of a head of household (as defined in section 2(b)), $161,250, and

(iii) in the case of any taxpayer not described in clause (i) or (ii), $107,500.

For purposes of this paragraph, the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.

In the case of any taxable year beginning after 2027, each of the dollar amounts in subparagraphs (A) and (B) shall be increased by an amount equal to— If any amount as increased under the preceding sentence is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.

(i) such dollar amount, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2026 for calendar year 2016 in subparagraph (A)(ii) thereof.

The amendment made by this section shall apply to taxable years beginning after December 31, 2026.

Section 164(a) of the Internal Revenue Code of 1986 is amended by inserting after paragraph (4) the following new paragraph:

(5) Qualified special assessment taxes.

Section 164(b) of such Code is amended—

(1) by redesignating paragraphs (6) and (7) as paragraphs (7) and (8), respectively, and

(2) by inserting after paragraph (5) the following new paragraph:

The term qualified special assessment tax means a tax which is imposed—

(i) by a State, a possession of the United States, or a political subdivision of any of the foregoing, or by the District of Columbia,

(ii) on real property located within a geographic area designated as a special assessment district by such State, possession, or political subdivision, or by the District of Columbia, and

(iii) for the purpose of funding a community infrastructure project that would directly benefit such real property.

For purposes of subparagraph (A), the term community infrastructure means a project or facility described in clause (ii) that is owned by—

(I) a State, a possession of the United States, or a political subdivision of any of the foregoing,

(II) the District of Columbia, or

(III) a not-for-profit, member-owned utility service.

A project or facility described in this clause is any of the following:

(I) Any transportation project.

(II) A school, hospital, police, fire, emergency response, or other community support facility.

(III) A water, waste-water, stormwater, telecommunications, electric, gas, or other utility infrastructure project.

(IV) A dam restoration project.

The deduction under subsection (a) for qualified special assessment taxes may only be allowed if such taxes are paid or accrued with respect to the taxpayer’s principal residence (within the meaning of section 121).

Section 164(b)(7)(B) of such Code, as redesignated by subsection (b), is amended by striking and (3) and inserting (3), and (5).

Section 164(c)(1) of such Code is amended by striking Taxes and inserting Except as provided in subsection (a)(5), taxes.

The amendments made by this section shall apply to taxable years beginning after December 31, 2026.