Lawmakers Near SALT Cap Deal That Could Offer Major Relief to Homeowners in High-Tax States

Yahoo

22-05-2025

Homeowners in high-tax states may soon get a break. Lawmakers are nearing a deal to raise the federal cap on state and local tax (SALT) deductions from $10,000 to $40,000—potentially unlocking major tax savings for homeowners in states like California, New Jersey, and New York.
The SALT cap has become a sore spot for lawmakers in those states, where rapid property appreciation has driven some tax bills well above the current $10,000 limit. With constituents unable to deduct the full amount, the cap became a political flashpoint and nearly derailed the latest Republican tax-and-spending package after a group of GOP House members threatened to block the bill unless it included more generous tax relief.
Now, a compromise appears to be in reach.
The SALT cap refers to the federal limit on how much you can deduct in state and local taxes—including property taxes—from your federal income taxes. It was introduced as part of President Trump's landmark 2017 Tax Cuts and Jobs Act, partly as a way to offset the cost of broader tax cuts.
Since then, home values have soared, along with the property tax bills that come with them. But under current law, homeowners can only deduct up to $10,000 in combined state and local taxes. That means if your property tax bill is $15,000, only $10,000 of it counts as a deduction on your federal return.
The cap has hit homeowners in high-tax states the hardest. In places like California, New Jersey, and New York, high home prices and higher effective property tax rates often push even middle-class families above that $10,000 threshold, leaving them unable to claim a large chunk of what they pay in local taxes.
While not yet finalized, lawmakers are closing in on a deal to raise the SALT deduction cap to $40,000—a major increase from the current $10,000 limit—and up from the initially proposed $30,000 cap in the current version of the bill.
It's a meaningful concession to the so-called SALT Caucus, a group of mostly blue-state Republicans who have pushed for more generous relief for their constituents. But it remains unclear whether the $40,000 cap will go far enough. Some members, like New York Rep. Nick LaLota, had previously demanded increases as high as $62,000 for single filers and $120,000 for joint filers.
Whether this new figure is enough to win their support is still a live question—and a critical one. The SALT Caucus has already proven its power by joining forces with budget hardliners to block an earlier version of the bill.
If passed, the new cap would offer significant tax relief to a specific group of homeowners—primarily those in high-tax states who itemize deductions and pay well above $10,000 in property and income taxes each year.
The cap would begin phasing down at $500,000 of income, but those below that threshold could claim up to $40,000 in deductions. Property taxes alone often exceed $10,000 in states like California, New Jersey, New York, and Connecticut. Add state income taxes, and many households could easily reach, or even exceed, the newly proposed cap.
But note, the increased deduction is only relevant for taxpayers who itemize their deductions instead of taking the standard deduction. And the standard deduction is set to increase to $32,000 for joint filers (up from $29,200 in 2024) if the new tax bill passes.
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