If you’re a high earner living in a high-tax state, your federal tax bill might shrink soon. Lawmakers are pushing to raise the limit on state and local tax (SALT) deductions — and that could mean bigger savings for you.
Here’s what’s happening, who stands to gain, and how to prepare.
What’s the SALT Deduction, Anyway?
The SALT deduction lets taxpayers who itemize deduct certain taxes — like property taxes and either state/local income or sales taxes — from their federal taxable income.
Right now, the deduction is capped at $10,000 ($5,000 if you’re married but filing separately), and that cap is scheduled to expire in 2025.
What Could Change?
A recent bill passed by the House aims to quadruple the SALT cap — up to $40,000 ($20,000 for married filing separately). The cap would also inch up 1% every year through 2033.
There’s a catch: if your modified adjusted gross income (MAGI) is over $500,000, your deduction may be reduced — but it would never fall below the current $10,000 cap.
Keep in mind, this proposal still needs to survive the Senate, where the details could shift.
Who Would See the Biggest Break?
High-income earners under the $500,000 mark — especially in high-tax states like California, New York, and New Jersey — stand to gain the most.
Why? These residents tend to pay hefty state income and property taxes, so raising the cap would let them deduct a lot more, potentially saving thousands on their federal tax bill.
On the flip side, if you don’t itemize, don’t pay state income taxes, or don’t own property, this change likely won’t affect you much.
What Are People Saying?
We scanned Reddit threads and used AI tools to digest what taxpayers are buzzing about — and opinions are all over the map.
- Frustration is common among people in high-tax states. Many feel the current cap causes “double taxation” and unfairly punishes them for where they live.
- Married couples and HENRYs (High Earners, Not Rich Yet) say they’re hit especially hard.
- Others argue that raising the cap mostly helps wealthy taxpayers and that residents in low-tax states shouldn’t have to “subsidize” those in high-tax areas.
Should You Do Anything Right Now?
Not just yet. It’s still a proposal — not law. So no need to rush into changing your tax strategy.
“This is not a law yet, so you can’t fully plan for it,” says Miklos Ringbauer, a CPA based in Los Angeles.
That said, it is a good time to start exploring your options and thinking ahead.
How to Prepare
1. Stay informed.
Follow the bill’s progress. If you have strong feelings about it, call your senator and share your thoughts. Public feedback can influence how the bill shapes up.
2. Run the numbers.
Use tax software or an online calculator to see how your tax picture might change if the SALT cap is raised. You can also talk to a tax professional to model different scenarios.
3. Compare standard vs. itemized deductions.
For 2025, the standard deduction will be:
- $15,000 for single filers
- $22,500 for heads of household
- $30,000 for married couples filing jointly
If your itemized deductions could top those numbers, the SALT cap changes might really matter to you.
4. Maximize your deductions.
Thinking about itemizing next year? You might consider strategies like:
- Prepaying your property taxes
- Boosting charitable donations
(But again — hold off until the law is finalized.)
Bottom Line
A higher SALT deduction cap could be a big win for high earners in high-tax states — but the final decision rests with the Senate. For now, stay alert, start planning, and talk to a tax pro to understand how this might affect your situation.
