What Is the State and Local Tax (SALT) Deduction? Three Things to Know for 2025

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The federal deduction for state and local taxes (SALT) has been part of the U.S. tax code for over a century. The tax break allows eligible taxpayers to reduce their federal tax liability by deducting certain state and local taxes.

But the limit on SALT deductions (the SALT cap) is changing again under the Trump/GOP tax and spending bill (Public Law 119‑21), signed by President Trump on July 4.

The law, often called the “big beautiful bill,” temporarily expands the amount taxpayers can deduct for state and local taxes, offering new opportunities—and rekindling old debates—about fairness and fiscal policy.

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So, what’s happening with the deduction? Here are three things taxpayers should know about how the SALT deduction works, who benefits, and what’s changing for 2025 tax returns.

1. What is the SALT deduction?

The SALT deduction allows taxpayers who itemize to subtract certain state and local taxes from their federal taxable income. These taxes include state property taxes, income taxes, and sales taxes.

Before 2018, there was no limit on the amount that could be deducted. However, the Tax Cuts and Jobs Act of 2017 (TCJA), also known as the "Trump tax cuts," imposed a cap of $10,000 on the SALT deduction ($5,000 for married individuals filing separately) from 2018 through 2025.

Taxpayers had to itemize their deductions to be eligible for the SALT deduction rather than taking the standard deduction.
So, the SALT deduction and other itemized deductions had to exceed the standard deduction to be beneficial.

Note: For 2025, the standard deduction has been increased due to inflation adjustment and the enactment of Trump's new tax bill. So, it's $15,750 for single filers and $31,500 for married couples filing jointly.

2. SALT cap politics

The SALT deduction has stirred debate across partisan and regional lines.

Some lawmakers from high‑tax states have argued that the cap unfairly penalizes their residents, while some conservatives see the deduction as a giveaway to upper‑income taxpayers.

Then, during the 2024 presidential campaign, Donald Trump stirred the SALT pot by pledging to “bring back SALT.”

"VOTE FOR TRUMP! I will turn it around, get SALT back, lower your Taxes, and so much more," the President posted on Truth Social.

That claim, seemingly designed at the time to appeal to voters in the Empire State, was among a string of tax proposals mentioned in Trump campaign events, from no tax on tips to ending taxes on Social Security and eliminating federal taxes on overtime pay.

However, the "get SALT back" claim was ironic since the deduction was capped at $10,000 due to the TCJA. (That 2017 tax law was the signature tax overhaul of the first Trump administration.)

The SALT cap has been particularly unpopular in high-tax states like New York, New Jersey, and California — so-called “blue states” that typically lean Democratic.

Supporters of the higher SALT deduction say it helps offset state and local tax burdens in regions with high living costs. Opponents counter that restoring or expanding it primarily benefits higher‑income households, who are already more likely to itemize.

And adding to the chatter this past year:

With other key tax provisions, the SALT cap was initially set to expire at the end of 2025, if Congress hadn't taken action.
Limiting the SALT deduction served as an offset for various 2017 TCJA tax cuts.
Estimates from the Joint Committee on Taxation (JCT) had the cap increasing federal revenues by about $21 billion a year.)

Some opponents of increasing the SALT cap argue the limitation primarily impacts majority Democratic states with high local and state taxes, like New Jersey, and Connecticut. However, so-called "red states" have been impacted as well.

Data show some of these states have seen reduced tax benefits for residents and various impacts on property values and local government budgets.

For more information, see Kiplinger's report 2025 SALT Cap Could Hurt Top 'Hidden Home Cost.

3. SALT cap increase in Trump's 'big beautiful bill' 2025

As mentioned, the SALT deduction cap was set to expire at the end of this year, along with many other provisions of the TCJA. That set up a major post-election tax battle on Capitol Hill that has culminated in the enactment of Trump's 2025 tax and spending bill.

Proponents of the now-increased SALT deduction often argue that the cap disproportionately affected residents of high-tax states, which tend to provide extensive public services. Other related arguments have been that:

Increasing the deduction helps prevent double taxation by allowing taxpayers to avoid paying federal taxes on income already paid to state and local governments.
It could also support state and local government autonomy in setting tax rates.

Meanwhile, some opponents of the more robust SALT deduction contend that the tax break primarily benefits taxpayers with higher incomes.

According to the Tax Foundation, before the cap, 91% of the deduction's benefit has gone to those with incomes over $100,000.

The fiscal impact? The JCT estimated that the SALT deduction cap could increase federal revenue by about $77 billion in 2019 alone.

Conversely, had Congress removed the cap altogether , that would have resulted in a significant loss of federal revenue: (A little over $1 trillion, according to Committee for Responsible Budget estimates).

The new GOP mega tax legislation makes the following SALT changes, seen by some as a compromise:

The SALT deduction cap temporarily increases to $40,000 per household, but only for those with adjusted gross incomes (AGI) at or below $500,000 and only from 2025 through
Those above that income limit will be subject to the $10,000 cap.
Also, both the $40,000 and $500,00 limit will be subject to a 1% inflation adjustment.

The legislation implements a five-year sunset for the higher SALT cap amount (cap reverts to $10,000 in 2030 for all taxpayers) and contains loopholes for some business owners in states that permit them.

Note: These changes take effect for the 2025 tax year (returns you'll typically file in early 2026). So, consult a tax professional if you have questions or concerns about how the new cap changes could impact your tax bill.

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Kelley R. Taylor is the senior tax editor at Kiplinger.com, where she breaks down federal and state tax rules and news to help readers navigate their finances with confidence. A corporate attorney and business journalist with more than 20 years of experience, Kelley has helped taxpayers make sense of shifting U.S. tax law and policy from the Affordable Care Act (ACA) and the Tax Cuts and Jobs Act (TCJA), to SECURE 2.0, the Inflation Reduction Act, and most recently, the 2025 “Big, Beautiful Bill.” She has covered issues ranging from partnerships, carried interest, compensation and benefits, and tax‑exempt organizations to RMDs, capital gains taxes, and energy tax credits. Her award‑winning work has been featured in numerous national and specialty publications.