🏡 How the SALT Cap Increase in the Big Beautiful Bill Could Put More Money Back in Your Pocket

alison882
Jul 10
2 min read

If you’ve ever itemized deductions and hit a frustrating limit on how much you could deduct for state and local taxes (SALT), you're not alone. Since the Tax Cuts and Jobs Act (TCJA) of 2017 imposed a $10,000 cap on SALT deductions, many taxpayers—especially those in high-tax states—have seen their federal tax bills climb.

But relief is on the way.

The Big Beautiful Bill (BBB), a sweeping piece of tax legislation, includes a long-anticipated change: a substantial increase of the SALT cap. And that could be a game changer for your tax return.

📌 First, What Is the SALT Deduction?

The SALT deduction allows taxpayers who itemize to deduct certain taxes paid to state and local governments, including:

State income taxes
Local property taxes
Sales taxes (in some cases)

Before 2018, there was no federal limit on how much you could deduct. But under the TCJA, the deduction was capped at $10,000 ($5,000 if married filing separately)—a limit that hit hardest in states like New York, New Jersey, California, Massachusetts, and Illinois.

💡 What’s Changing in the BBB?

The BBB raises the cap on SALT deductions significantly to $40,000 depending on income and filing status. That means if you paid $18,000 in state income and property taxes, you may now be able to deduct every dollar—not just the first $10,000.

📈 Who Benefits the Most?

This change primarily helps:

Homeowners in high-property-tax states
Professionals and business owners with higher incomes
Itemizers who previously lost the full value of their SALT payments

If you’re a married couple earning $250,000+ and paying state income tax plus property tax, you could see thousands in tax savings from this one change alone.

🧮 An Example: Before and After the SALT Cap Lift

Before BBB (TCJA rules):

State income tax paid: $12,000
Property tax paid: $8,000
Deductible SALT: $10,000 (capped)

After BBB SALT cap lift:

Deductible SALT: $40,000
Net increase in deductions: $10,000 → Potential tax savings of $2,400–3,700 depending on your bracket

🛠 What Should You Do Now?

Review past tax returns — Look at how much SALT deduction you lost under the cap.
Talk to your CPA — You may want to adjust your withholdings or change your estimated payments.
Revisit itemizing — The larger deduction may make itemizing worthwhile again, especially if combined with mortgage interest and charitable donations.

🧾 Final Thought: Strategy Still Matters

The SALT deduction isn’t just about reducing your tax bill—it’s about tailoring your tax plan to fit your life. Whether this cap increase benefits you a little or a lot depends on how proactive you are in adapting your strategy.

📅 Let’s schedule a tax review and make sure you’re positioned to take full advantage of the new rules.