If you own a home in California, New Jersey, or New York, you may finally have something to celebrate come tax season. After years of political wrangling and mounting pressure from both voters and advocacy groups, lawmakers on Capitol Hill have struck a deal to significantly ease the burden of the so-called SALT cap—the controversial limit on state and local tax deductions that’s pinched many middle-class households in high-tax areas.
Starting in 2025, the federal cap on SALT deductions will rise from $10,000 to $40,000. That’s a game-changing shift that could save thousands of dollars a year for homeowners who have been writing checks for soaring property tax bills while only being able to deduct a fraction of them.
For folks in states where a modest family home can trigger a five-figure tax bill, this is the kind of change you don’t just notice—you feel.
A Cap That Stung
To understand why this is such a big deal, you need to rewind to 2017. That year, President Trump signed the Tax Cuts and Jobs Act into law. Among other things, it introduced a new cap on how much taxpayers could deduct in state and local taxes, commonly called SALT. The number? $10,000.
Now, $10,000 might sound like plenty in, say, rural Idaho. But if you’re living in a modest home in suburban New Jersey or the Bay Area, that figure gets eaten up quickly, especially when you factor in both property taxes and state income taxes. For many families, the cap meant leaving money on the table every April.
This hit not just the wealthy but also the middle-class professionals in high-cost areas. And it quickly became a political flashpoint. Lawmakers from both sides of the aisle—especially those representing affluent or high-tax districts—faced mounting pressure from voters who felt penalized for where they lived.
In fact, the issue nearly sank a recent Republican tax-and-spending bill, as a group of GOP representatives from blue states threatened to walk away unless something changed.
What’s Changing Now
After months of negotiations and some hardball politics, Congress agreed to a new deal: Raise the SALT deduction cap to $40,000 starting in 2025. It’s a clear win for homeowners in high-tax states and a nod to a growing bipartisan consensus that the old limit was out of step with today’s real estate realities.
But there are strings attached.
The higher deduction will only apply to households earning less than $500,000. Earn more than that, and the benefit begins to phase out. Lawmakers also built in an inflation adjustment: both the cap and income threshold will rise by 1% each year until 2029.
In 2030, though, the cap snaps back to $10,000 unless Congress steps in again. Think of it as a temporary truce, not a permanent fix.
Why It Matters
For homeowners who itemize deductions, this change could have a big impact. Let’s say you live in Westchester County, New York, where the average property tax bill can top $17,000—and that’s before you account for state income tax. Under the current rules, you’re capped at deducting $10,000. But come 2025, if your combined state and local tax bill hits, say, $35,000, nearly all of it will become deductible again.
That could translate to thousands of dollars in federal tax savings.
But not everyone will benefit. If you typically take the standard deduction—and more than 85% of taxpayers do—you won’t notice a change. That said, the standard deduction is also going up: to $32,000 for joint filers in 2025, up from $29,200 in 2024, assuming the new bill passes.
So in some cases, families will have to do the math to see which route saves them more.
The Politics Behind the Policy
This shift didn’t happen by accident. A small but vocal group of lawmakers—the so-called SALT Caucus, made up largely of Republicans from blue states—pushed hard for the change. Some floated even higher caps: Rep. Nick LaLota of New York, for instance, proposed a whopping $62,000 cap for single filers and $120,000 for couples.
They were backed by heavyweight lobbying from the real estate world, particularly the National Association of Realtors® (NAR). The group leaned in hard, flooding Capitol Hill with polling, economic analyses, and meetings to make their case.
“We’ve worked for months to educate Congress through original NAR research, analysis and polling,” said Shannon McGahn, the group’s chief advocacy officer. “Congressional leaders were receptive to our message.”
Translation: They heard the voters—and the real estate lobby—loud and clear.
What to Watch Next
The deal is expected to be signed into law around July 4, giving homeowners a patriotic reason to celebrate. But like many tax breaks, this one comes with an expiration date. Unless lawmakers act again, the cap will return to $10,000 in 2030. That means this relief is more of a reprieve than a permanent solution.
In the meantime, if you own a home in a high-tax state or plan to buy one soon, it might be worth having a chat with your accountant. These changes could shift how you file your taxes, how you itemize deductions, and maybe even how much house you can afford.
After years of feeling squeezed, homeowners in states like California, New Jersey, and New York finally have a little breathing room. But whether that relief sticks around will depend, as always, on what Washington does next.
