2025 SALT Deduction: New $40,000 Cap & Who Benefits Most

Homeowners and taxpayers in high-tax states are poised for significant tax relief in 2025 as the state and local tax (SALT) deduction cap quadruples to $40,000.

Published on Feb. 12, 2026

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The SALT deduction allows taxpayers who itemize to subtract certain state and local taxes from their federal taxable income, preventing double taxation. The change, enacted through the One Big Beautiful Bill Act (OBBBA) in July 2025, dramatically alters the landscape for taxpayers in states with high tax burdens, as the SALT deduction cap increases from $10,000 to $40,000. This substantial increase will provide significant tax savings for middle- to high-income households in states with high income taxes, such as California, New York, and Connecticut.

Why it matters

The increased SALT deduction cap will provide much-needed tax relief for homeowners and taxpayers in high-tax states, allowing them to deduct a larger portion of their state and local taxes from their federal taxable income. This change is particularly beneficial for middle- to high-income households, who often hit the previous $10,000 cap with state income taxes alone.

The details

The SALT deduction allows taxpayers who itemize to subtract certain state and local taxes from their federal taxable income, including state and local income taxes (or sales tax), real estate property taxes, and personal property taxes. The change, enacted through the One Big Beautiful Bill Act (OBBBA) in July 2025, dramatically alters the landscape for taxpayers in states with high tax burdens, as the SALT deduction cap increases from $10,000 to $40,000. This substantial increase will provide significant tax savings for middle- to high-income households in states with high income taxes, such as California, New York, and Connecticut.

  • The change was enacted through the One Big Beautiful Bill Act (OBBBA) in July 2025.
  • The expanded $40,000 cap is currently scheduled to remain in place through the 2029 tax year, with annual inflation adjustments.

The players

Tax Foundation

An independent tax policy nonprofit organization that provides analysis of tax issues.

Committee for a Responsible Federal Budget

A nonpartisan, non-profit organization focused on federal budget and fiscal policy.

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What’s next

Unless Congress takes action, the $40,000 SALT deduction cap is set to revert to $10,000 in 2030.

The takeaway

The increased SALT deduction cap will provide significant tax relief for middle- to high-income households in high-tax states, allowing them to deduct a larger portion of their state and local taxes from their federal taxable income. This change is a major shift that could have a substantial impact on the finances of many taxpayers.