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The House just made a move that could shake up tax season for a lot of Americans-especially those in high-tax states. Lawmakers voted to raise the cap on the SALT deduction (short for state and local taxes), a part of the tax code that's been stirring debate since 2017.
Right now, taxpayers can only deduct up to $10,000 in state and local taxes when they itemize deductions. That cap was introduced through the Tax Cuts and Jobs Act (TCJA), and it hit harder in places like New York, California, and New Jersey, where property taxes and incomes run high.
If the new proposal becomes law, the cap would jump to $40,000 starting in 2025, with a gradual phaseout for individuals earning over $500,000. The cap and phaseout threshold would increase by 1% annually until 2033.
Who Gains the Most? The Upper Middle and Upper Class
While $40,000 sounds generous, not everyone will feel the impact. According to Garrett Watson at the Tax Foundation, "the top 20% of taxpayers would be the only group to meaningfully benefit." That means households earning over $400,000-especially those who itemize-are in the best position to see savings.
That's because most Americans-nearly 90%-take the standard deduction, which is already pretty high ($30,000 for t filers in 2025). So unless you're in a high-tax state and have significant deductions, this change won't move the needle for you.
Still, some lawmakers say the cap hurts more than just the wealthy. Rep. Josh Gottheimer (D-N.J.) argued this week that raising the SALT cap would provide real relief for middle-class families in his district, where home prices and property taxes are steep-even if household incomes aren't sky-high.
But it's not all upside. The revised proposal also includes a cutback on itemized deductions for top earners in the 37% tax bracket, which could blunt some of the benefit of the higher SALT cap.
The Senate still has to weigh in, and it's far from a done deal. Earlier efforts to repeal or raise the SALT cap have hit resistance, especially from lawmakers who argue it's a giveaway to the rich.
So while the proposal is a potential win for some, especially in high-cost states, it's not the sweeping tax break that some are hoping for-at least not yet.