(Recasts with SALT compromise)
WASHINGTON, Oct 31 (Reuters) - Quarreling Republicans in Congress were close to a deal on Tuesday to preserve a federal tax deduction for state and local property taxes, but not income tax payments, potentially removing a major obstacle to progress on their U.S. tax overhaul plan.
New York Republican Representative Tom Reed said a "sweet spot" compromise was gaining support among high-tax state lawmakers who have resisted the tax overhaul due to its proposed repeal of the state and local tax, or SALT, deduction.
The deal "goes a long way to listen to their plight, respond to their needs," Reed told reporters on Capitol Hill.
The popular, long-standing federal deduction for state and local taxes is just one tax provision targeted by congressional Republicans and President Donald Trump in a plan they hope to enact into law before the end of 2017.
Overhauling the tax code would be Trump's first major legislative achievement since he took office in January, if his plan, consisting mainly of deep tax cuts, is approved.
More details of the plan, possibly in full legislative format, are expected to be released on Wednesday. Any delay in that self-imposed deadline could jeopardize Republicans' push to enact tax legislation by year's end.
House of Representatives tax committee Chairman Kevin Brady told radio commentator Hugh Hewitt on Tuesday that Wednesday's package will maintain the federal deduction for SALT property tax payments, but not SALT income tax payments.
Such a deal would reduce, but not eliminate a disproportional impact on upper middle-class families in high-income tax states such as New York, New Jersey and California. They send enough Republicans to Congress to derail a tax bill.
Other elements of the tax-cut plan remained up in the air, including proposals affecting retirement savings, small businesses and business interest payments.
Republicans control both houses of Congress.
TRUMP, PENCE ENGAGED
As the Trump administration escalated its pro-tax plan campaign, Vice President Mike Pence met with Republicans on Tuesday, while Trump hosted industry leaders and then House Speaker Paul Ryan, at the White House.
Trump said at the White House he wants Congress to pass tax reform bills by the U.S. Thanksgiving holiday on Nov. 23.
If Republicans succeed, it would be the first major overhaul of the tax code since former Republican President Ronald Reagan's in 1986, though Trump's plan is less comprehensive.
The Trump plan, calling for $6 trillion in tax cuts for businesses and individuals over a decade, faces heavy resistance from special-interest lobbyists defending pet loopholes.
A proposal to limit how much money Americans can direct to their 401(k) retirement accounts on a pre-tax basis is meeting resistance, including from fund managers who handle 54 million such accounts.
Republicans initially proposed capping tax-free 401(k) contributions at $2,400, down from $18,000 in 2017, but the figure is in flux.
Representative Kevin McCarthy, a member of Republican leadership, told reporters he would "like to see how much we can put away, raise that cap on how much we can put away, tax free."
Senator Heidi Heitkamp, one of a few Democrats being courted by Republicans, said she cannot support lowering the cap on tax-free retirement contributions. "I will not vote for that," she told reporters.
(Reporting by David Morgan and Amanda Becker; additional reporting by Jeff Mason, Susan Cornwell and Richard Cowan; Editing by Jeffrey Benkoe and Dan Grebler)