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From Washington Examiner:
Senate Republicans passed changes to the federal deduction for state and local taxes, known as SALT, on Tuesday, a crucial part of President Donald Trump’s “big, beautiful bill.”
In the Senate’s version of the reconciliation bill, pushed heavily by House Republicans, the SALT deduction would allow people to deduct up to $40,000 per year for five years from their federal taxes. Once an individual’s annual income hits $500,000, the SALT deduction phases out.
While the bill is still awaiting a final vote in the House, Republicans in the lower chamber are expected to pass it by July 4, meeting Trump’s self-imposed deadline.
When filing their taxes, taxpayers can either take the standard deduction or do an itemized deduction, which includes state and local taxes (SALT), using whichever is greater.
In the tax year 2025, the standard deduction for single filers was increased from the previous year due to inflationary pressures, reaching $15,000. Married couples filing jointly also benefited from this adjustment, with their standard deduction rising to $30,000.
The SALT deduction enables taxpayers to deduct a portion or all of their state and local taxes from their federal taxable income. Taxpayers can also deduct sales tax and annual property taxes, but they must choose whether to deduct local income taxes or local sales taxes.
All taxpayers are eligible to claim the SALT deduction, but with the Tax Cuts and Jobs Act of 2017, a $10,000 cap was placed on the SALT deduction. That is set to expire after the current tax year. The cap has been challenging for residents of high-tax states like New York, New Jersey, and California.
How do the changes affect you?
The SALT deduction is not typically claimed by people in the middle class Fox Business reports, so for 90% of taxpayers the changes won’t affect them.
“The $40,000 threshold is not a benefit for middle-income or average Americans in any state,” Adam Michel, the director of tax policy studies at the Cato Institute, explains. “For most Americans, especially those in low- and middle-income brackets or in states with lower taxes, it does very little, or nothing.”
But for higher earners with high property taxes, this change will be a benefit.
The new proposed SALT provisions will also safeguard a workaround for businesses to circumvent the SALT cap, enabling owners to disregard the $10,000 limit.
READ MORE AT WashingtonExaminer.
