U.S. Representative Josh Gottheimer (D-NJ) speaks during a press conference about the SALT Caucus outside the United States Capitol on Wednesday February 08, 2023 in Washington, DC.
Matt McClain | The Washington Post | Getty Images
As debates ramp up for President Donald Trump’s policy agenda, changes to a key tax provision could benefit higher earners, experts say.
Enacted via the Tax Cuts and Jobs Act, or TCJA, of 2017, there’s a $10,000 limit on the federal deduction on state and local taxes, known as SALT, which will sunset after 2025 without action from Congress.
Currently, if you itemize tax breaks, you can’t deduct more than $10,000 in levies paid to state and local governments, including income and property taxes.
Raising the SALT cap has been a priority for certain lawmakers from high-tax states like California, New Jersey and New York. With a slim House Republican majority, those voices could impact negotiations.
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While Trump enacted the $10,000 SALT cap in 2017, he reversed his position on the campaign trail last year, vowing to “get SALT back” if elected again. He has renewed calls for reform since being sworn into office.
Lawmakers have floated several updates, including a complete repeal, which seems unlikely with a tight budget and several competing priorities, experts say.
“It all has to come together in the context of the broader package,” but a higher SALT deduction limit could be possible, said Garrett Watson, director of policy analysis at the Tax Foundation.
Here’s who could be impacted.
How the SALT deduction works
When filing taxes, you choose the greater of the standard deduction or your itemized deductions, including SALT capped at $10,000, medical expenses above 7.5% of your adjusted gross income, charitable gifts and others.
Starting in 2018, the Tax Cuts and Jobs Act doubled the standard deduction, and it adjusts for inflation yearly. For 2025, the standard deduction is $15,000 for single filers and $30,000 for married couples filing jointly.
Because of the high threshold, the vast majority of filers — roughly 90%, according to the latest IRS data — use the standard deduction and don’t benefit from itemized tax breaks.
Typically, itemized deductions increase with income, and higher earners tend to owe more in state income and property taxes, according to Watson.
Who benefits from a higher SALT limit
Generally, higher earners would benefit most from raising the SALT deduction limit, experts say.
For example, one proposal, which would remove the “marriage penalty” in federal income taxes, involves increasing the cap on the SALT deduction for married couples filing jointly from $10,000 to $20,000.
That would offer almost all the tax break to households making more than $200,000 per year, according to a January analysis from the Tax Policy Center.
“If you raise the cap, the people who benefit the most are going to be upper-middle income,” said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.
Of course, upper-middle income looks different depending on where you live, he said.
Forty of the top 50 U.S. congressional districts impacted by the SALT limit are in California, Illinois, New Jersey or New York, a Bipartisan Policy Center analysis from before 2022 redistricting found.
If lawmakers repealed the cap completely, households making $430,000 or more would see nearly three-quarters of the benefit, according to a separate Tax Policy Center analysis from September.