A battle is heating up in Congress over the State and Local Tax deduction, also known as SALT. At stake is a proposed increase to the federal deduction cap, which could deliver major tax relief for homeowners in high-tax states.
The current cap, set in 2017, limits deductions to $10,000. A new bill could raise that to $30,000—a change with significant financial impact for many Americans.
What is the SALT deduction?
The SALT deduction allows taxpayers to subtract what they pay in state and local income and property taxes from their federal taxable income. But since the 2017 Tax Cuts and Jobs Act, the deduction has been capped at $10,000 per year.
That limit disproportionately affects homeowners in high-tax states like New York, New Jersey, California, Connecticut, and Massachusetts, where property tax bills often exceed that amount.
What’s being proposed?
A group of House Republicans from high-tax states is pushing to raise the cap to $30,000. They argue the current deduction punishes homeowners in their districts, where property values and tax burdens are higher than the national average.
Speaker of the House Mike Johnson recently stated that “everything is on the table” as lawmakers negotiate the broader tax package, and the SALT deduction increase is a key sticking point.
How would raising the cap help homeowners?
Raising the cap could free up thousands of dollars in tax savings each year. For example, a homeowner in New Jersey paying $17,000 in property taxes currently loses $7,000 of that deduction. At a 35% federal tax rate, that’s nearly $2,500 in lost tax savings.
If the cap increases to $30,000, those homeowners could deduct more of what they already pay—reducing their total tax liability.
It could also impact housing decisions. According to Realtor.com senior economist Joel Berner, the expanded deduction could “boost buying power,” encouraging some owners to move up into larger or more expensive homes. That would help unlock inventory in a tight housing market.
Berner gives an example: If a homeowner saves $7,000 annually and applies it toward a mortgage, they could afford a home that’s about 10% more expensive—jumping from a $1 million to a $1.1 million budget.
Who would benefit the most?
The biggest impact would be in areas where property tax bills routinely exceed $10,000. According to Realtor.com, these are the top five states by share of properties over the current cap:
Top states by affected properties:
- New Jersey: 39.9%
- New York: 25.9%
- Connecticut: 19.4%
- California: 19.3%
- Massachusetts: 18.4%
Top metro areas with high tax bills:
- San Jose, CA: 47.9%
- New York City, NY–NJ: 47.8%
- San Francisco, CA: 40.9%
- Bridgeport, CT: 39.3%
- Trenton, NJ: 35.8%
Homeowners in these locations would benefit most from a higher deduction.
What if Congress doesn’t act?
Without legislative change, the $10,000 cap remains in place. For now, many homeowners may want to explore local options for relief.
Realtor.com estimates that 40% of Americans might be overpaying on property taxes. Appealing a property tax assessment—especially if local home values have fallen or stayed flat—can lower your annual bill.
Online tools allow homeowners to compare their assessed value to nearby homes and submit appeals using data, not guesswork.
What comes next?
The debate over the SALT deduction is part of a larger tax policy negotiation in Congress. With limited room for compromise, lawmakers from high-tax states could block the broader tax bill if the cap stays unchanged.
Whether the deduction increases or not, the issue remains a key concern for millions of homeowners trying to balance rising property taxes with affordability.
This content is brought to you by the FingerLakes1.com Team. Support our mission by visiting www.patreon.com/fl1 or learn how you send us your local content here.