The state and local tax deduction (SALT) has been getting attention lately. That's partly because President Trump floated the idea (supported by some Democrats) to "bring back SALT" (i.e., get rid of the $10,000 deduction cap).
The SALT deduction 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.
However, major tax changes in recent years and ongoing political debate, including Trump’s recent comments, have spotlighted this deduction again.
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So, what’s happening with the SALT deduction? Here are three things you need to know now.
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) imposed a cap of $10,000 on the SALT deduction ($5,000 for married individuals filing separately) from 2018 to 2025.
- Taxpayers have 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 must exceed the standard deduction to be beneficial.
Note: For the 2024 tax year, the standard deduction was $14,600 for single filers and $29,200 for married couples filing jointly. For 2025, it's $15,000 for single filers and $30,000 for married couples filing jointly.
2. Why the Trump SALT cap is in the news
Then-candidate Trump made headlines during the presidential campaign with a social media post calling for reinstating the full SALT deduction.
"VOTE FOR TRUMP! I will turn it around, get SALT back, lower your Taxes, and so much more," the President posted on Truth Social.
The claim, seemingly designed 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.
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.
However, the "get SALT back" claim is ironic since the deduction was capped at $10,000 due to the TCJA. The TCJA is the signature tax overhaul of the Trump Administration, sometimes referred to as the “Trump tax cuts.”
And adding to the chatter:
- With other key tax provisions, the SALT cap is set to expire soon — at the end of this year (2025) if Congress doesn’t act.
- Limiting the SALT deduction served as an offset for various 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 the SALT cap argue the limitation primarily impacts majority Democratic states with high local and state taxes, like New York, California, New Jersey, and Connecticut. However, other 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.
3. What the TCJA expiration means for the SALT deduction cap
As mentioned, the SALT deduction cap is set to expire at the end of this year, along with many other provisions of the TCJA, setting up a major post-election tax battle on Capitol Hill that has already begun.
Proponents of reinstating the full SALT deduction often argue that the cap disproportionately affects residents of high-tax states, which tend to provide extensive public services. Other related arguments are that:
- Reinstating the deduction would prevent double taxation by allowing taxpayers to avoid paying federal taxes on income already paid to state and local governments.
- It would also support state and local government autonomy in setting tax rates.
Meanwhile, some opponents of reinstating the full 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 went to those with incomes over $100,000.
So, the arguments for not reinstating the full deduction are primarily that:
- The SALT deduction incentivizes higher state and local taxes, potentially leading to less efficient government spending.
- Removing the cap would significantly reduce federal revenue.
The fiscal impact? The JCT estimated that the SALT deduction cap would increase federal revenue by about $77 billion in 2019 alone.
Conversely, removing the cap would result in a significant loss of federal revenue (a little over $1 trillion, according to Committee for Responsible Budget estimates). (It's worth noting that several options to deal with the SALT deduction, beyond full reinstatement, are floating around with varied projected budget impacts).
The debate over the SALT deduction has created unusual political alliances. Some Democrats from high-tax states have pushed for the cap's removal. This would notably align with Trump, who, at least during the campaign, appeared to support the reinstatement of the deduction. Also, as Kiplinger has reported, some Republican lawmakers are pushing to increase or repeal the SALT cap.
Update: On May 22, Republican lawmakers in the U.S. House of Representatives passed their version of what Trump has called "one big beautiful [reconciliation] bill" to address taxes, the border, and energy.
In a last-minute amendment, the SALT deduction cap would increase to $40,000 per household, but only for those with adjusted gross incomes (AGI) at or below $500,000. Those above that income limit would be subject to the $10,000 cap. Also, both the $40,000 and $500,00 limit would be subject to a 1% inflation adjustment.
Note: That provision is subject to negotiation and could change in the coming weeks as the bill advances in the Senate.
State and local tax deduction: Bottom Line
As the debate unfolds, lawmakers will have to weigh the benefits of tax relief for residents of high-tax states against the potential loss of federal revenue and concerns about tax fairness.
So, if you’ve been impacted by the SALT cap, stay tuned. You’ll be hearing more than you would probably like about tax and tax credits, and deductions in the coming months.
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