These High Tax States Could Benefit the Most From Higher SALT Deduction

Yahoo

16-05-2025

There's a new bill in Washington that's become the subject of some ugly debate. In a surprising twist, the fate of the current House Republican tax package might hinge on a proposal to raise the State and Local Tax (SALT) deduction cap.
Under current law, homeowners can deduct up to $10,000 in combined state income and property taxes on their federal return—a limit set by the 2017 Tax Cuts and Jobs Act. But that cap is set to expire, and a bloc of House Republicans from high-tax states like New York, New Jersey, and California are threatening to derail the package unless the SALT cap is raised or scrapped entirely.
The current proposal would raise the deduction limit from $10,000 to $30,000, but some lawmakers argue that still falls short of providing meaningful relief for their constituents. If the measure passes, however, here are the areas that can benefit the most.
Property taxes have been something of an albatross around the neck of homeowners. After the equity boom following the COVID-19 pandemic pushed home prices (and tax assessments) to new heights, homeowners have been left footing the bill for higher taxes.
Many state and local governments have responded by passing exemptions that lower the taxable value of homes, particularly for seniors and longtime residents who have owned their homes for decades or more. But there hasn't been the kind of national relief that could provide a meaningful resolution for U.S. homeowners now sitting on (and paying taxes on) $35 trillion of residential real estate wealth.
Enter the SALT cap.
The federal limit on state and local tax deductions has been a sore spot for homeowners in high-tax states where their annual property tax bill exceeds the $10,000 threshold. Removing or raising that cap could offer much-needed breathing room.
But the implications go beyond individual tax bills. Easing the SALT deduction limit could also help unstick a sluggish housing market by unlocking more buying power.
'This deduction could also help some owners move up,' explains Realtor.com® senior economist Joel Berner. By boosting buying power, the expanded deduction could motivate some homeowners to part with their historically low mortgage rates and move into the new home they want or need—freeing up inventory for other hopeful buyers.
How much could it help? Berner offers a scenario:
'Suppose someone owns a $1,000,000 home and decided to put all the tax savings into the monthly mortgage payment for their next home—that $7,000 per year would increase their home price budget to about $1.1 million, or 10%.'
In a tight market where affordability is stretched and inventory is limited, that kind of financial flexibility could be the nudge both sellers and buyers need.
'Increasing the SALT cap from $10,000 to $30,000 or more would have the most impact on homeowners in high-tax states and in high-dollar homes,' says Berner. 'An additional $20,000 in deductions could be worth about $7,000 in annual tax savings for these individuals (assuming a 35% federal tax rate).'
But that relief won't be equally felt across the country. That's because some states and counties have much lower property values and tax rates, so homeowners don't pay over the current $10,000 cap.
Take Daniel Cabrera, founder and CEO of Fire Damage House Buyer, for example. As a resident of San Antonio, TX, he pays about $7,000 a year in property taxes—well within the current limit of SALT deductions.
But his New Jersey–based parents pay roughly $17,000 a year in property taxes.
'With the present $10,000 SALT limit and 35% federal income tax rate, they lose the ability to claim about $7,000,' he explains.
That $7,000 hits especially hard as his parents near retirement.
'There's been just constant conversations about them coming down here to Texas,' he says. That's because Texas not only has a lower overall property tax burden than New Jersey, but also offers a range of local exemptions for seniors that can significantly reduce their tax bills.
Who will benefit from SALT deductions largely depends on where they live and what their current tax burden is. An analysis from Realtor.com pinpoints the top five states and 10 metro areas with the highest share of properties that exceed the current SALT cap.
State
Share of properties with tax bills over $10K
NJ
39.9%
NY
25.9%
CT
19.4%
CA
19.3%
MA
18.4%
Metropolitan Statistical Area
Share of properties with tax bills over $10K
San Jose-Sunnyvale-Santa Clara, CA
47.9%
New York-Newark-Jersey City, NY-NJ
47.8%
San Francisco-Oakland-Fremont, CA
40.9%
Bridgeport-Stamford-Danbury, CT
39.3%
Kiryas Joel-Poughkeepsie-Newburgh, NY
37.5%
Trenton-Princeton, NJ
35.8%
Nantucket, MA
35.5%
Austin-Round Rock-San Marcos, TX
32%
Jackson, WY-ID
28.7%
Santa Cruz-Watsonville, CA
28.1%
The debate over the current tax package—including changes to the SALT deduction—is still unfolding. With only $50 billion in negotiating room left, it's unclear whether that will be enough to appease lawmakers from high-tax states. If not, their opposition could be significant enough to derail the entire bill.
But homeowners don't have to wait for federal tax relief.
A Realtor.com analysis found that nearly 40% of Americans might be overpaying on property taxes—and could save money by appealing their tax assessments. A new tool makes the process easier: Homeowners can compare their property's assessed value to similar nearby homes and use that data as evidence in their appeal. It's a simple, data-driven way to push back against rising tax bills, no legislation required.
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