The OBBB Act significantly modifies the State and Local Tax (SALT) deduction — one of the most debated elements of recent tax law. Beginning in 2025, the SALT deduction cap will:
Increase from $10,000 to $40,000, and
Grow 1% annually through 2029
In 2030, the deduction reverts back to $10,000.
This change may offer considerable relief to individuals in states with higher income or property taxes. However, the benefit is limited to those with incomes under $500,000, as the legislation imposes a threshold that restricts higher earners from accessing the expanded deduction.
For many upper-middle-income households, particularly in states like New York, New Jersey, California, and Illinois, the increased SALT limit may meaningfully reduce taxable income. However, those with high earnings or substantial itemized deductions may not receive the full benefit due to the income cap and the temporary nature of the expansion.
For taxpayers considering large property tax payments, future income changes, or residence decisions, understanding the timing and phase-out rules is essential.
Sources 1. Congress.gov, July 4, 2025 2. Internal Revenue Service, July 25, 2025. 3. Internal Revenue Service, July 25, 2025.