The state and local tax (SALT) deduction lets taxpayers write off certain state and local taxes from their federal taxable income. Under the One Big Beautiful Bill Act, signed into law by President Trump on July 4, 2025, the annual SALT write-off cap was raised from $10,000 to $40,000 for tax years 2025 through 2029. The cap increases by 1% annually before reverting to $10,000 in 2030. This expanded limit applies only to filers with modified adjusted gross income under $500,000, with phaseouts beginning above that.
What Is the SALT Write-Off?
The SALT write-off is a federal tax deduction for taxpayers who itemize. It lets them subtract state and local income, sales or property taxes from their taxable income. The write-off prevents a form of double taxation by excluding from federal income taxes the money already paid locally.
What You Can and Cannot Write Off
You can deduct state and local income tax, property tax or sales tax—but you must choose between income and sales tax in a given year. Eligible income taxes include amounts withheld from paychecks, estimated payments or prior-year tax bills. Property taxes cover real estate and personal property taxes, such as those for vehicles.
Non-deductible items include federal income, Social Security and inheritance or estate taxes. Also non-deductible are most fees for licensing, garbage collection, HOA dues, water, sewer and transfer or stamp taxes. Excise taxes such as gasoline or vehicle registration also don’t qualify.
How Did the Trump Tax Plan Change the SALT Write-Off?
Before 2018, there was no cap on SALT write-offs. The Tax Cuts and Jobs Act (TCJA) introduced a $10,000 limit for individual or joint filers, and $5,000 for those filing separately.
The One Big Beautiful Bill Act, signed by President Trump on July 4, 2025, raised the SALT deduction limit to $40,000 for tax years beginning in 2025. Married individuals filing separately can deduct up to $20,000. The cap rises to $40,400 in 2026 and increases by 1% annually through 2029. After that, it returns to $10,000. This adjustment temporarily eases the constraint on filers in high-tax states while preserving a firm ceiling in the long term.
Income Phaseouts
The new law also introduces a phaseout for higher-income taxpayers. For filers with MAGI above $500,000 ($250,000 for separate filers), the SALT deduction is reduced by 30% of the amount exceeding that threshold. However, the deduction cannot fall below $10,000, even for high-income taxpayers. Both the cap and income thresholds are indexed for inflation beginning in 2026.
These changes reflect a compromise between competing policy priorities. Lawmakers from high-tax states had pushed for a full repeal of the SALT cap. Fiscal conservatives, on the other hand, opposed unlimited deductions. The result was a middle-ground solution that temporarily expands the deduction while retaining some limits for higher earners.
By lifting the cap for most taxpayers—while phasing it down for the highest earners—the revision aims to offer relief without fully reversing the original cap. The structure preserves some cost controls while benefiting homeowners and itemizers in states with above-average tax burdens.
Who Benefits from the SALT Deduction?
Homeowners in high‑tax states are the primary winners from the expanded SALT deduction. In places like New York, New Jersey, California, Connecticut and parts of Texas and Wyoming, a significant share of households pay more than the previous $10,000 cap.
According to data from Realtor.com1, nearly 40% of homeowners in New Jersey and 26% in New York pay more than $10,000 in property taxes, making them ideal candidates for relief. Meanwhile, more than 40% of homeowners in three high-cost metro areas pay over $10,000 in property taxes, according to the same analysis:
- San Jose-Sunnyvale-Santa Clara, CA: 47.9%
- New York-Newark-Jersey City, NY-NJ: 47.8%
- San Francisco-Oakland-Fremont, CA: 40.9%
However, the expanded cap still requires itemizing deductions to exceed the standard amounts ($15,750 for individuals and $31,500 for joint filers in 2025). That means many middle-income families may not see any direct advantage.
When Does the SALT Write-Off Expire?
The expanded SALT deduction created by the One Big Beautiful Bill Act is temporary. For tax years 2025 through 2029, the cap increases and adjusts slightly each year for inflation. Then in 2030, the cap automatically reverts to the previous $10,000 limit, with no inflation indexing beyond that point.
This built-in expiration is similar to other temporary provisions in the federal tax code. The indexed amounts apply to both the deduction cap and the income thresholds used to calculate phaseouts.
SALT Deduction Limits and Income Phaseouts
| Tax Year | SALT Deduction Limit | Phaseout Threshold (MAGI) |
|---|---|---|
| 2025 | $40,000 | $500,000 |
| 2026 | $40,400 | $505,000 |
| 2027 | $40,804 | $510,050 |
| 2028 | $41,212 | $515,151 |
| 2029 | $41,624 | $520,302 |
| 2030 | $10,000 | N/A |
Bottom Line
The SALT deduction has become a moving target in recent years, shaped by shifting political priorities and competing regional interests. With the latest changes set to last only through 2029, its long-term future remains uncertain. For now, the expanded cap offers short-term flexibility for some filers, particularly those in higher-tax areas whose itemized deductions exceed the standard threshold.
Tax Planning Tips
- A financial advisor can help you create a plan to manage your tax liability. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you want to know how much your next tax refund or balance could be, SmartAsset’s tax return calculator can help you get an estimate.
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