Lauren Schwarn, Neldwallet
House Republicans passed President Donald Trump’s “One Big, Beautiful Bill” on May 22.
This meaty budget adjustment bill includes provisions to increase state and local taxes, or salt deduction restrictions. If the changes were made through the Senate, certain taxpayers could see the big tax credits.
What is a salt cap?
A salt deduction is a tax deduction that allows an itemizer to deduct certain taxes from federal taxable income. Eligible deductions include the selection of property taxes and state and local sales taxes or state and local income taxes.
The salt deduction is currently limited to $10,000 ($5,000 for married people) and is set to expire at the end of 2025.
What might change?
The House bill will raise the salt cap to $40,000 ($20,000 for married people). This is four times the current limit. The upper limit and income threshold will increase by 1% per year until 2033. Taxpayers with adjusted gross income of over $500,000 will reduce their deductions, but not below $10,000.
However, details may change as the bill moves through the Senate.
Who will benefit?
Those living in high-tax states, particularly in California and New York, are in the position of seniors earning less than $500,000 to get the biggest break.
These taxpayers generally pay higher state income and property taxes and can claim larger deductions under the proposed changes. An increase in the cap could reduce these federal tax bills by thousands of dollars.
Those who don’t pay state income taxes will likely not earn items and those who don’t own the home will likely not benefit from the changes, says Miklos Ringbauer, a certified public accountant in Los Angeles.
Should I do something now?
We will refrain from changing our tax strategy until the bill’s future is certain.
“This is not yet a law so we can’t plan it completely,” says Ringbauer. In the meantime, you can explore how the proposed changes will affect you.
Please provide information
Track the progress of the bill. Taxpayers can also call senators and express their concerns about the bill and what they like about it, Ringbauer says.
Compare deduction options
Calculate whether itemizing a deduction is greater than receiving the standard deduction. (The standard deduction for 2025 is $15,000 for single filers, $22,500 for heads of households, $30,000 for jointly married taxpayers.)
If you are considering making it an item, look into ways to maximize your deduction, such as prepaid property taxes or increased charitable contributions.
Help me run the numbers
Ringbauer suggests you tie your number to a tax software program or online tax calculator or work with a tax professional. Experts can help you make the most advantageous choice, he says.
“Currently, we have resources and software that can run a variety of scenarios for clients.”
Lauren Schwarn writes for Nald Wallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.
The tax credits in articles may increase. Do you make a profit? It originally appeared in Nerdwallet.
