What’s the New SALT Bill?

Jasmine Trespecio
4 days ago
2 min read

Congress is currently debating changes to the state and local tax (SALT) deduction cap, which limits how much you can deduct from federal income taxes. The current cap — set at $10,000 by the 2017 Tax Cuts and Jobs Act — is set to expire at the end of 2025

Two Competing Proposals:

House Republicans have pushed to raise the cap dramatically to $40,000, phased out for incomes above $500,000
Senate Republicans initially supported keeping the cap at $10,000, but now appear ready to accept the $40K cap—with possible adjustments to the income phase-out .

Who Gains — and By How Much?

High earners (over ~$430K/year) will capture the lion’s share of benefits. The Tax Policy Center estimates repealing the cap entirely would give the top 0.1% an average tax cut of ~$140,000 in 2025
The top 20% of earners would benefit disproportionately—while the bottom 80% would see almost no change
Middle-income households living in high-tax states like California, New York, and New Jersey might begin to see modest relief, but they gain far less than wealthy homeowners

Why It Matters Now

Immediate Tax Relief: If the new cap becomes effective for 2025 (vs. delayed to 2026), homeowners and filers in high-tax states can reduce their 2024 tax liability.
Budget Timelines: Congress is racing toward a July 4 deadline to reconcile tax and spending bills
Broader Bill Stakes: This SALT provision is part of the larger "One Big Beautiful Bill Act," which also includes adjustments to child tax credits, energy tax credits, and more

Potential Downsides & Trade‑offs

Revenue Concerns: A higher SALT cap could cost the Treasury tens to hundreds of billions over the next few years, expanding the deficit
Unequal Benefit: The wealthiest benefit most, which critics argue makes it regressive
Complex Compliance: Proposed rules could exclude pass-through service businesses from the cap relief, complicating small‑business tax filings .

How It Affects You

High‑tax state residents (property and income taxes over $10,000):
- With a $40K cap, many could reclaim thousands in federal deductions.
- However, if you're in the top 0.1% or 1%, you’ll enjoy the biggest savings.
Middle class in moderate-tax areas:
- Unless your local taxes vastly exceed $10K, the impact is likely limited.
You’re a small business owner:

Bottom Line & Money Moves

Short term: Monitor whether the Senate adopts the $40K cap and whether it's active for the 2025 tax year.
Personal Planning:
- If you're in a high-tax state and itemize, set aside some of your tax refund for possible changes.
- Consult your accountant on how pass-through restrictions might affect your business.
- If you're a middle-income earner, don’t expect a windfall—but you’ll benefit slightly if you're near the current limit.
Policy Watch: Keep an eye on the tax bill’s final form, including how revenue offsets or other proposals may evolve.

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