House Proposes Changes to SALT Deductions

Jason Smith (R-MO), who is the chairman of the House Ways and Means Committee, is set to hold a press conference on May 13, 2025, just before a markup hearing at the Longworth House Building on Capitol Hill in Washington, DC.

On Thursday morning, House lawmakers approved modifications to federal deductions for state and local taxes, commonly referred to as SALT, as part of President Donald Trump’s tax reform agenda. This was enacted through the 2017 Tax Cuts and Jobs Act (TCJA). The $10,000 limit on SALT deductions has been a focal point for House members from high-tax states like New York, New Jersey, and California. To qualify for tax cuts related to SALT, filers have to itemize their deductions.

If the House’s plans come to fruition, the SALT cap would increase to $40,000, a rise from the previously suggested $30,000, with potential increases exceeding $500,000. This revised proposal was released by the House Rules Committee and is set to take effect in 2025.

According to the proposal, the SALT caps and the gradual phase-out of revenue will see an annual increase of 1% from 2026 through 2033.

Understanding SALT Deductions

When it comes to filing taxes, individuals can opt for either the standard deduction or to itemize the majority of their deductions. This includes, for instance, the $10,000 SALT cap, as well as healthcare costs that exceed 7.5% of adjusted gross income, charitable donations, and more.

Starting in 2018, the Tax Cuts and Jobs Act doubled the standard deduction and incorporated annual inflation adjustments. For 2025, the standard deduction is expected to be $15,000 for single filers and $30,000 for married couples filing jointly. These amounts could change based on upcoming tax proposals in the House.

Recent IRS data indicates that about 90% of filers utilize the standard deduction, meaning they won’t benefit from itemizing their deductions.

Who Stands to Gain from a Higher SALT Cap

“Raising the cap will mainly benefit higher-income earners,” said Garrett Watson, director of policy analysis at the Tax Foundation, in a recent analysis. The top 20% of taxpayers, particularly those with incomes exceeding $400,000, will be the primary beneficiaries of these changes.

Nevertheless, members of the “SALT Caucus” contend that the issue of the SALT deduction limit affects the middle class in their districts. Co-chair Josh Gottheimer mentioned on CNBC’s “Exchange” that completely eliminating the $10,000 SALT deduction cap would represent a significant tax reduction for middle-class families across the country.