Congress' Newly Passed Bill Means Homeowners Could Save Thousands In Taxes

Newsweek

15 hours ago

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While President Donald Trump's newly passed "big, beautiful bill" makes sweeping changes to programs such as Medicaid and SNAP that have drawn significant opposition, there's some good news for homeowners.
A key provision included in the law will raise the cap on the State and Local Tax (SALT) deduction to $40,000. That's four times the previous $10,000 limit, meaning homeowners could save thousands of dollars in taxes each year, depending on where they live.
Why It Matters
Trump signed the massive spending plan into law on Friday, offering significant boosts to homeowners. For those living in places with high income taxes and property bills, the new SALT cap could result in thousands of dollars saved, potentially affecting the greater housing market affordability in those areas.
A "for sale" sign is displayed outside a home on August 16, 2024, in Los Angeles.
A "for sale" sign is displayed outside a home on August 16, 2024, in Los Angeles.
PATRICK T. FALLON/AFP via Getty Images
What To Know
While the SALT deduction cap was previously set at $10,000, the new Trump and largely Republican-endorsed law has raised the amount to $40,000.
A little over 65 percent of Americans own their homes, translating to roughly 230 million homeowners, according to Simply Insurance. But homeowners who live in states with high income taxes are much more likely to benefit from the changing SALT cap.
In New Jersey, for example, nearly 40 percent of properties are taxed over $10,000, with New York falling close behind at 25.9 percent, according to Realtor.com.
"Increasing the SALT cap from $10,000 to $40,000 will have the greatest impact on homeowners in areas with highest state and local taxes, or those in the most expensive homes," Realtor.com senior economist Jake Krimmel told Newsweek. "An additional $30,000 in deductions could amount to about $10,500 in annual tax savings for such homeowners, assuming a 35 percent federal marginal tax rate."
The newly approved bill also extends the deductibility of mortgage insurance premiums, which originally expired after tax year 2021. Middle-class homeowners can use this deduction to get some additional tax relief.
What People Are Saying
Krimmel also told Newsweek: "While the deduction provides tax relief for higher-income homeowners, it may also affect certain local housing markets. Raising the SALT cap creates a greater incentive to own in expensive, high tax neighborhoods, such as affluent suburbs with high property taxes and good schools. As demand for these neighborhoods rises, expect home prices to edge up there, too."
Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, told Newsweek: "The SALT deduction is going to be a major win for the people in blue states like New York and California. This brings back a much needed tax deduction for those high tax areas."
Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "The SALT cap was one of the most contested components to tax legislation during the first Trump presidency. Its increase offers a huge boost to taxpayers in states like New York and California that have homeowners with higher property tax costs and is mostly good news for residents in certain states dealing with the same inflationary pressures others are."
What Happens Next
There could be a surge of homebuyers in previously expensive real estate markets with high taxes due to the SALT cap increase. Florida and Texas residents especially could see some housing cost relief as a result, experts say.
"You can start seeing a positive increase in people moving to areas where taxes are a bit higher due to being able to offset some of the cost using a higher SALT deduction," Thompson said.
"In previous years, there was a migration out of those states but now there could possibly be less of a migration and people willing to stay in those high tax areas."