SALT

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The Republicans' marquee legislation temporarily raises the SALT deduction limit to $40,000 starting in 2025. That benefit starts to phaseout, or decrease, for consumers who earn more than $500,000 of income. Both figures will increase by 1% yearly through 2029 and the higher limit will revert to $10,000 in 2030.

Compared to an earlier approved House bill, SALT deduction relief is two-thirds larger in Trump's legislation, including alternative minimum tax changes, according to a Saturday analysis from the Committee for a Responsible Federal Budget.

Trump's legislation also reduces itemized deductions for certain taxpayers in the top 37% income tax bracket, which lowers the benefit of the bigger SALT cap for the highest earners.

When filing taxes, you pick the greater of the standard deduction or your itemized deductions, which include SALT capped at $10,000, medical expenses above 7.5% of your adjusted gross income, charitable gifts and others.

Starting in 2018, the Tax Cuts and Jobs Act doubled the standard deduction, and it adjusts for inflation yearly. For 2025, the standard deduction is $15,000 for single filers and $30,000 for married couples filing jointly. Under Trump's legislation, these standard deductions will increase to $15,750 and $31,500, respectively.

Under the current thresholds, the vast majority of filers — roughly 90%, according to the latest IRS data — use the standard deduction and don't benefit from itemized tax breaks.

In 2022, the average SALT deduction was close to $10,000 in states like Connecticut, New York, New Jersey, California and Massachusetts, according to a Bipartisan Policy Center analysis with the latest IRS data. Those high averages indicate "that a large portion of taxpayers claiming the deduction bumped up against the $10,000 cap," researchers wrote.

Meanwhile, the states and district with the highest share of SALT claimants were Washington, D.C., Maryland, California, Utah and Virginia, the analysis found.

Raising the SALT deduction cap would primarily benefit higher earners, according to a May analysis from the Tax Foundation.

Trump’s legislation also protects a SALT cap workaround for pass-through businesses, which allows owners to sidestep the $10,000 cap. By contrast, the previous version of the House-approved bill would have ended the strategy for certain white-collar professionals.

Chye-Ching Huang, executive director of the Tax Law Center at New York University School of Law, criticized the Senate-approved SALT provisions in a post on X on Saturday.

"It preserves (and lessens) a limit on deductions for wealthy taxpayers while ignoring a loophole that allows the wealthiest of those taxpayers to avoid the limit entirely," she wrote.