House Republican tax bill passes 'SALT' deduction cap of $40,000

On Thursday morning, House lawmakers approved revisions to the federal deduction for state and local taxes — commonly known as the SALT deduction — as part of President Donald Trump’s broader tax package.

The current $10,000 SALT cap was implemented under the Tax Cuts and Jobs Act (TCJA) of 2017, and lifting that limit has long been a goal for lawmakers from high-tax states such as New York, New Jersey, and California. To claim the SALT deduction, taxpayers must itemize rather than take the standard deduction.

Under the revised House measure, the SALT deduction cap would rise to $40,000, an increase from the $30,000 cap proposed in an earlier version. The deduction would phase out entirely for incomes above $500,000, according to language released by the House Rules Committee. These changes would take effect in 2025.

The cap and phaseout threshold would then increase by 1% each year through 2033, per the updated bill.

However, the proposal also includes a reduction in itemized deductions for taxpayers in the top 37% income tax bracket, which could limit the actual benefits of the higher SALT deduction for high earners.

For 2025, the 37% bracket applies to individuals earning more than $626,350, and married couples filing jointly with income over $751,600.

Despite House passage, the SALT changes may face resistance in the Senate.

Prior to the TCJA, the SALT deduction was uncapped, but the Alternative Minimum Tax (AMT) often curtailed its value for wealthier households.

How the SALT deduction works:

When preparing a tax return, filers must choose between the standard deduction and itemized deductions. Itemized deductions include:

• State and local taxes (SALT), capped at $10,000
• Medical expenses above 7.5% of adjusted gross income
• Charitable donations
• Other allowable deductions

The Tax Cuts and Jobs Act nearly doubled the standard deduction beginning in 2018, and it's adjusted annually for inflation. For 2025, the standard deduction is projected to be:

• $15,000 for single filers
• $30,000 for married couples filing jointly

These amounts could increase under the proposed legislation.

Currently, about 90% of taxpayers opt for the standard deduction, according to IRS data, meaning most filers do not benefit from itemizing or claiming the SALT deduction.