Trump-Era Tax Law Delivers Bigger Refunds to Blue-State Taxpayers

Expanded SALT deduction boosts federal refunds for high-tax state residents this filing season.

Mar. 30, 2026 at 10:04am

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An extreme close-up of heavy, industrial banking machinery and equipment, conveying a sense of financial security and institutional wealth through its tactile, mechanical details.The expanded SALT deduction has delivered larger federal tax refunds to residents of high-tax blue states this filing season.California Today

Millions of Americans in high-tax states like New York, New Jersey, and California are receiving larger federal tax refunds this season, a direct result of the expanded state and local tax (SALT) deduction in President Donald Trump's 2025 tax law. The change benefits taxpayers who itemize deductions, largely those earning between $150,000 and $600,000, and is expected to save them roughly $29 billion this filing season.

Why it matters

The SALT deduction expansion disproportionately benefits taxpayers in Democratic-leaning 'blue' states that tend to have higher state and local taxes. This has become a politically charged issue, with Republicans arguing the change unfairly favors wealthier residents in those states while Democrats view it as restoring a valuable tax break.

The details

Congress raised the SALT deduction cap from $10,000 to $40,000 under last year's 'One Big Beautiful Bill' passed during the Trump administration. The change allows taxpayers who itemize deductions to write off more of their state and local taxes, which are generally higher in coastal, Democratic-led states. An analysis by Navy Federal Credit Union found average refunds in California are up 21% from 2025, Virginia up 13%, and Maryland up 12%, while Florida and Texas saw more modest 6% and 5% increases respectively.

  • The SALT deduction cap expansion took effect in the 2025 tax year.
  • Taxpayers are receiving the larger refunds as they file their 2026 returns.

The players

Donald Trump

The former U.S. president who signed the tax law that included the SALT deduction cap expansion.

Piper Sandler

A financial services firm that analyzed the impact of the SALT deduction changes, estimating they will save taxpayers roughly $29 billion this filing season.

Navy Federal Credit Union

A credit union that analyzed refund data showing larger average increases in high-tax blue states compared to low-tax red states.

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What’s next

Unless Congress acts, the $40,000 SALT deduction cap is set to expire after 2029, reverting back to the original $10,000 limit.

The takeaway

The SALT deduction changes have become a politically divisive issue, with the expanded cap delivering larger refunds to high-tax blue states while leaving lower-tax red states with more modest increases. The temporary nature of the changes also sets up a future debate in Congress over whether to make the higher deduction limit permanent.