The SALT deduction lets taxpayers who itemize subtract state and local taxes from their federal taxable income, and under the One Big Beautiful Bill Act, the cap on that deduction has jumped from $10,000 to as much as $40,000 for many households starting with the 2025 tax year.
What Changed Under the New Law
For years, the SALT deduction had no ceiling at all. That ended with the 2017 Tax Cuts and Jobs Act, which capped it at $10,000, a limit that hit hard in places like New York, New Jersey and California where property and income taxes routinely exceed that figure. Dennis Huergo, vice president at Wealth Enhancement Group, put it plainly: the people who benefit most from the new cap are generally upper middle income taxpayers in high tax states carrying large property tax or income tax bills.
Now, through the One Big Beautiful Bill Act, households with modified adjusted gross income under $500,000 can deduct up to $40,000 in state and local taxes, provided they itemize. The benefit phases out between $500,000 and $600,000 in income, and above $600,000 the deduction reverts to the old $10,000 cap. The higher limit applies for tax years 2025 through 2029.
Who Actually Benefits From the Higher Cap
Not every taxpayer gains from this. The people who see the biggest advantage are those paying more than $10,000 a year in combined state, local and property taxes, which typically means higher earners in expensive, high tax states. Megan Gorman, managing partner at Chequers Financial Management, noted that for many high earners in California, New York and New Jersey, the 2017 tax law was not really a tax cut at all. It functioned as a tax increase once the SALT cap kicked in.
That earlier cap changed behavior across the country. In 2017, more than 30 percent of taxpayers itemized their deductions. By 2021, once the Tax Cuts and Jobs Act had settled in, that share had fallen to just 9 percent, largely because the standard deduction also rose sharply, from $6,500 to $12,000 for single filers. With a bigger standard deduction available, fewer people found it worthwhile to track mortgage interest, charitable gifts and state taxes just to itemize.
Itemize or Take the Standard Deduction
The math has gotten more complicated again. The One Big Beautiful Bill Act made the higher standard deduction permanent and indexed it to inflation going forward. For 2025, the standard deduction sits at $15,750. So a taxpayer now has to weigh whether itemizing, using the expanded SALT deduction alongside things like charitable donations and mortgage interest, actually beats simply taking that flat $15,750.
Gorman said much of the decision for high earners comes down to whether they want to itemize and combine the charitable deduction with the SALT deduction, or just stick with the standard deduction. For someone well above the $600,000 threshold, the calculation gets even more pointed, since they are stuck with the old $10,000 cap regardless. Gorman raised the idea that an executive with access to deferred compensation might consider timing income to fall under $600,000 in a given year specifically to capture the larger deduction. But she was blunt about the tradeoff involved in engineering that kind of move for a $40,000 deduction: is the juice worth the squeeze.
Comparing the SALT Deduction Rules
| Provision | Before OBBBA (TCJA rules) | Under OBBBA (2025 to 2029) |
|---|---|---|
| SALT deduction cap | $10,000 for all itemizers | Up to $40,000 for income under $500,000 |
| Phaseout range | None | $500,000 to $600,000 in modified AGI |
| Cap above phaseout | $10,000 | $10,000 for income of $600,000 or more |
| Standard deduction (single filer, 2025) | Lower, pre TCJA baseline | $15,750, permanent and inflation adjusted |
| Sunset date | N/A | December 31, 2029 |
What Happens When This Provision Expires
Lawmakers from high tax states like New York and California pushed hard during negotiations to get this expanded deduction into the bill, but it is not permanent. The higher cap is scheduled to end on December 31, 2029, at which point the rules could revert unless Congress acts again. Anyone relying on this deduction as part of a longer term tax strategy should treat it as a temporary window rather than a fixed feature of the tax code.
Is Itemizing Worth It for Your Situation
The honest answer depends on your income, where you live and what other deductions you might claim. Someone paying $25,000 in property and state income taxes and earning $300,000 could see real savings by itemizing now. Someone earning $650,000 in a high tax state, still capped at $10,000, may find the standard deduction simpler and just as effective. Running the numbers both ways, ideally with a tax professional, remains the only reliable way to know which path saves more.