By Lauren Schwahn, NerdWallet
House Republicans passed President Donald Trump’s “one big, beautiful bill” on May 22.
This meaty budget reconciliation bill includes a provision to increase the state and local tax, or SALT, deduction limit. If the changes make it through the Senate, certain taxpayers could see big tax breaks.
What is the SALT cap?
The SALT deduction is a tax break that allows people who itemize to deduct certain taxes from their federal taxable income. Eligible deductions include property taxes and a choice of state and local sales taxes or state and local income taxes.
The SALT deduction is currently capped at $10,000 ($5,000 for those married filing separately) and is set to expire at the end of 2025.
What might change?
The House bill would raise the SALT cap to $40,000 ($20,000 for those married filing separately), four times higher than the current limit. The cap and income thresholds would increase by 1% annually through 2033. Taxpayers with a modified adjusted gross income over $500,000, would have a reduced deduction, but it would not go lower than $10,000.
But the details could change as the bill moves through the Senate.
Who might benefit?
High-earners making less than $500,000, especially those living in higher-tax states such as California and New York, are positioned to get the biggest breaks.
These taxpayers are generally paying higher state income and property taxes, and could claim larger deductions under the proposed changes. The cap increase could lower these federal tax bills by thousands of dollars.
People who don’t pay state income taxes, don’t itemize and don’t own homes likely wouldn’t benefit from the changes, says Miklos Ringbauer, a certified public accountant in Los Angeles.
Should I do anything now?
Hold off on changing your tax strategy until the bill’s future is certain.
“This is not a law yet, so you can’t fully plan for it,” Ringbauer says. In the meantime, you can explore how the proposed changes might impact you.
Stay informed
Track the bill’s progress. Taxpayers can also call their senators and express their concerns with the bill or what they like about it, Ringbauer says, which could help shape the final version.
Compare deduction options
Calculate whether itemizing your deductions would be greater than taking the standard deduction. (The standard deduction for 2025 is $15,000 for single filers, $22,500 for heads of household and $30,000 for taxpayers who are married filing jointly.)
If you’re considering itemizing, explore ways to maximize your deductions, such as prepaying property taxes or increasing charitable donations.
Get help running the numbers
Ringbauer suggests plugging your numbers into tax software programs and online tax calculators, or working with a tax professional. Professionals can help you make the most tax advantageous choices, he says.
“We have resources and software now that can run different scenarios for our clients.”
Lauren Schwahn writes for NerdWallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.
The article Tax Deductions Might Go Up. Would You Benefit? originally appeared on NerdWallet.
