Relief may be on the horizon for homeowners struggling with property tax bills, especially those in high-tax states.
The massive budget package recently passed by the House, nicknamed the “One, Big, Beautiful Bill,” contains a provision that would substantially increase the cap on state and local tax (SALT) deductions from $10,000 to $40,000 — potentially delivering significant tax savings to millions of Americans.
What are SALT deductions and what’s changing?
The current $10,000 SALT deduction cap was established in 2017 as part of the Tax Cuts and Jobs Act. This limit covers what taxpayers can deduct for state income taxes, property taxes, and sales taxes combined.
The new bill would quadruple this cap to $40,000, with the change scheduled to take effect for the current 2025 tax year.
However, this isn’t a benefit everyone will enjoy equally.
The full $40,000 deduction would only be available to households with incomes below $500,000. Those earning above this threshold would face a phaseout, though the deduction wouldn’t drop below the current $10,000 level.
Both the cap and income limit would increase by 1% annually over the next decade, according to one analysis.
Who stands to benefit most?
The higher SALT cap primarily benefits homeowners whose potential itemized deductions exceed the standard deduction. For context, the standard deduction for married couples in 2025 will be $30,000, while single filers can claim $15,000.
To take advantage of the increased SALT cap, taxpayers would need their total itemized expenses — including property taxes, state income taxes, and mortgage interest — to exceed these standard deduction amounts.
This means the benefits would largely flow to:
- Homeowners in high-property-tax areas
- Residents of states with significant income taxes like New York, California, New Jersey and Massachusetts
- Higher-income taxpayers who pay substantial state income taxes
The increased cap would also address a major complaint about the 2017 tax law — that it created a marriage penalty by setting the same $10,000 SALT limit for both single and married filers.
Typically, tax provisions offer more generous thresholds for married couples.
What’s the financial impact?
While the increased deduction cap would bring relief to many homeowners, it comes with a substantial price tag.
According to analysis from the Penn Wharton Budget Model, raising the SALT cap to $40,000 would result in nearly $334 billion in lost tax revenue over the next decade compared to keeping the $10,000 cap.
Some lawmakers from high-tax congressional districts have championed the change. The provision includes annual increases for inflation and income caps designed to ensure the benefit isn’t exclusively a “handout for the uber wealthy.”
What happens next?
Before homeowners can count on this tax relief, the bill still needs to clear the Senate. Some Republicans have already expressed opposition to certain aspects of the larger package, particularly regarding Medicaid spending cuts.
The SALT provision could undergo further changes before reaching the president’s desk for signature.
For homeowners wondering if they might benefit, the key question is whether your combined state and local tax burdens, along with other potential itemized deductions, would exceed your standard deduction.
If your property taxes and state income taxes currently exceed the $10,000 cap — particularly if you live in a high-cost area — you stand to gain the most if the legislation moves forward in its current form.
Add a Comment