SALT Deduction
Understanding the increased SALT deduction in Trump's 2025 tax changes
SALT Deduction in the Big Beautiful Bill Act
The Trump tax changes 2025 under the One Big Beautiful Bill Act (OBBA) raise the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for tax years 2025–2030, benefiting high earners in high-tax states like New York, California, and New Jersey. This change, part of the Big Beautiful Bill tax changes, phases out for incomes above $500,000 (single) or $1,000,000 (joint), with a 1% annual increase in the phase-out threshold. The Tax Foundation estimates this could save taxpayers in high-tax states up to $7,400 annually.
Previous Cap (TCJA)
Limited deductions for high earners in high-tax states
New Cap (OBBA)
Significant relief for taxpayers in high-tax states
What is the SALT Deduction?
The SALT deduction allows taxpayers to deduct state and local taxes (e.g., property, income, sales taxes) from their federal taxable income. Under the TCJA (2017), the cap was set at $10,000, limiting benefits for high earners. The OBBA's $40,000 cap restores significant deductions for homeowners and professionals in high-tax regions.
Example: California Couple
A California couple with $50,000 in state taxes could now deduct $40,000, reducing their federal tax by up to $9,600 (24% bracket).
Impact on High Earners
While the increased cap benefits middle- and upper-middle-class taxpayers in high-tax states, the phase-out above $500,000 limits savings for top earners. Taxpayers should itemize deductions to claim SALT benefits, as the standard deduction ($15,750 single, $31,500 joint) may be higher for some.
Phase-out Thresholds
- • Single: $500,000
- • Married: $1,000,000
- • 1% annual increase
Key Benefits
- • Higher deduction cap
- • Relief for high-tax states
- • Homeowner benefits
Calculate Your SALT Savings
Our tax comparison calculator compares OBBA and pre-TCJA taxes but doesn't directly factor SALT deductions. To estimate SALT benefits, reduce your taxable income by up to $40,000 before entering it.