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Congress Is Prioritizing a Tax Break That Only a Few Can Claim (Can You?)

The SALT deduction cap is under scrutiny again, but only a small percentage of taxpayers likely stand to benefit.

By Adam Palasciano

Edited by Chris Kissell

Updated May 5, 2025

Members of Congress are debating potential changes to the state and local tax (SALT) deduction. As these discussions take place, many Americans wonder if future adjustments will impact their tax bill.

The SALT deduction has been a contentious issue, especially in high-tax states. Understanding the nuances of the SALT deduction is crucial for those aiming to make informed financial decisions and build wealth.

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What is the SALT tax deduction?

The SALT deduction allows taxpayers to deduct certain state and local taxes — such as income, sales, and property taxes — from their federal taxable income.

However, this deduction is only available to those who itemize their deductions rather than taking the standard deduction.

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Who benefits from the SALT tax break?

For the 2025 tax year, the standard deduction is $15,000 for single filers and married couples filing separately. It's $30,000 for married couples filing jointly.

Therefore, to benefit from itemizing, a taxpayer's total deductions must exceed these amounts. That means relatively few people actually benefit from the SALT deduction.

How has the SALT tax deduction changed in recent years?

Before 2018, there was no restriction on the amount of state and local taxes that could be deducted. However, the Tax Cuts and Jobs Act (TCJA) of 2017 placed a cap of $10,000 on the SALT deduction, or $5,000 for married individuals filing separately.

This cap significantly limits the deduction's benefit, particularly for residents in high-tax states. The cap is set to expire at the end of 2025 unless Congress takes action to extend or modify it.

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How might the SALT tax deduction change again?

As the expiration of the SALT deduction cap looms, Congress is weighing various ways to extend and modify the current rule.

One option would double the cap to $20,000 for joint filers. Another option would increase the cap to $15,000 for single filers and $30,000 for joint filers.

Still another proposal suggests allowing only property taxes to be deducted without a cap, excluding income and sales taxes.

All of these potential changes aim to address concerns about the deduction's impact on taxpayers in high-tax states while also balancing federal revenue considerations.

Who can typically claim the SALT deduction?

Taxpayers who itemize their deductions and who pay substantial state and local taxes are typically the primary beneficiaries of the SALT deduction.

This group often includes higher-income individuals residing in states with high income and property taxes. Such states include New York, California, and New Jersey.

However, due to the $10,000 cap, even these taxpayers may find the deduction's benefit limited.

Why the SALT deduction doesn't impact most people

The majority of taxpayers opt for the standard deduction, which simplifies the filing process and often results in a lower tax liability without the need to itemize.

Given the $10,000 cap on the SALT deduction, many taxpayers with lower incomes and fewer deductions find that their total itemized deductions do not exceed the standard deduction threshold. As a result, 90% of taxpayers opt for the standard deduction, according to a Bloomberg report.

That means the SALT deduction primarily benefits a small segment of the population with higher incomes and significant state and local tax burdens.

It's important to assess whether itemizing provides a greater tax benefit than the standard deduction in your specific situation.

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Bottom line

While the SALT deduction has been a focal point in tax policy discussions, its benefits are currently limited to a specific group of taxpayers who itemize and have significant state and local tax liabilities.

As potential changes to the SALT deduction are debated, those who are hoping to get ahead financially must stay informed and assess how these adjustments may affect their tax situation.

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