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Texas Border Business / Mega Doctor News
The “One, Big, Beautiful Bill Act” (OBBB), signed into law on July 4, 2025, contains a major adjustment to the State and Local Tax deduction, often referred to as SALT. According to the text of the new provisions, the law “increases from $10,000 to $40,000 the maximum 1040 itemized deduction for the total of non-business state & local property tax, plus sales tax (or state income tax, if higher).”
The SALT deduction is a provision in the federal tax code that allows taxpayers who itemize to deduct certain state and local taxes from their federal taxable income. These taxes include property taxes as well as either state income or sales taxes. The deduction is designed to prevent what is often called “double taxation,” meaning taxpayers would otherwise pay federal income tax on money already taxed at the state or local level.
For several years, the deduction has been capped at $10,000. That limit was first introduced in 2017 under the Tax Cuts and Jobs Act. Before 2017, there was no cap, and many taxpayers in states with high property taxes or state income taxes were able to deduct tens of thousands of dollars each year. Critics of the $10,000 cap argued that it disproportionately affected taxpayers in high-tax states such as New York, California, and New Jersey.
The OBBB Act temporarily changes that. For tax years 2025 through 2029, the SALT cap is quadrupled to $40,000. Starting in 2030, however, the law specifies that the cap will “revert to $10,000.” The increase is therefore temporary, giving taxpayers a five-year window to benefit from a larger deduction.
The new rules also include limits based on income. The law states that the deduction is “subject to phase-down for taxpayers with adjusted gross income in excess of $500,000 (single) or $1 million (filing jointly).” In practice, this means the higher SALT deduction is targeted at middle- and upper-middle-income households who itemize deductions, while very high earners will not receive the full benefit.
The potential tax impact can be significant. Consider a household in New Jersey that pays $15,000 in property taxes and $20,000 in state income taxes, for a total of $35,000 in SALT payments. Under the old $10,000 cap, the household could deduct only a fraction of that amount on their federal return. Under the new $40,000 cap, they could deduct all $35,000, reducing their taxable income substantially.
Not all taxpayers will see a difference. Those who claim the standard deduction rather than itemizing are unaffected by the change. According to IRS statistics, the majority of taxpayers do not itemize, so the expanded SALT deduction mainly helps those who live in higher-tax jurisdictions and whose deductions exceed the standard deduction.
The temporary nature of the change raises uncertainty about what will happen after 2029. Unless Congress acts again, the cap will automatically fall back to $10,000 in 2030. For now, the OBBB Act marks a significant but time-limited increase in the SALT deduction, restoring some of the benefits that taxpayers had before the 2017 law.
