Taxes are very confusing for a lot of people in the United States. This is become even harder when the laws change. SALT stands for State and Local Taxes. The taxes like property taxes, income taxes, and sales taxes. The SALT deduction will subtract some of these taxes from your federal income tax in the United States.
But in the year 2017, the Tax Cuts and Jobs Act (TCJA) did a big change. The law create a limit of $10,000 on the amount of deduction on SALT taxes. This was a big deal for people who lived in high tax states like California, New York, New Jersey etc.
Many people said that, this change hurt them because their state taxes were higher than $10,000. So they will deduct all of it.
In 2025, there are new changes to the SALT deduction. This can help a lot of people, especially in those high tax states.
The SALT deduction helps those taxpayers who itemize their deductions reduce their taxable income by the amount they pay in state and local taxes.
Before 2017, there was no limit. So people can deduct all their state taxes. But after the TCJA the cap was set at $10,000. And this helps people in high tax states can not fully deduct the amount they were paying in taxes.
The change in 2025
In July 2025, President Trump signed a law called the One Big Beautiful Bill (OBBB). And it made some important changes to the SALT deduction:
- The new law raises the SALT cap from $10,000 to $40,000 for the people with an income of $500,000 or less. After this people who live in states with high taxes can now deduct more money. This will help reduce their taxes.
- If your income is more than $500,000, you can deduct a maximum amount of $10,000. But for those people whose income is between $500,000 and $600,000. The new $40,000 cap will now go down. It will reduce until the amount of $10,000 for the people who earns $600,000 or more.
- The $40,000 cap will increase by 1% every year. This will keep up with inflation. This means it will slowly grow over time. And help people to continue getting a larger deduction in future years.
- These changes are only temporary and will last until 2029. After that, the cap will return to the original $10,000 unless the law is changed again.
The new changes are great news for people in high tax states.
For example, if you live in California or New Jersey, you need to pay a lot in state and local taxes. Under the old law, you only can deduct $10,000, which is not enough. But now, you can deduct up to $40,000. Only if you meet the income requirements.
Let’s say I am married and live in California. My family income is $450,000 in a year. I pay $30,000 in state income taxes and $15,000 as my property taxes. So total I pay $45,000. So according to the old laws, I can only deduct $10,000 from my federal taxes. But with the new law, I can now deduct the full $40,000 cap. And this will help me to save a lot.
So people who live in high tax states like California, New York, and New Jersey. The people will be able to get the most benefit from the new law.
If you earn $500,000 or less, you can get the benefit from the higher $40,000 cap.
And if your income is above $500,000, you can get the old $10,000 cap. But it will gradually go down until $600,000.
So the Salt deduction changes in the 2025 will be helpful for the people who live in high tax states. If you live in California, New Jersey, you will be able to save more on your taxes. Remember, this changes is temporary and will last until 2029.
