House Republican tax bill passes 'SALT' deduction cap of $40,000. Here's who benefits
Enacted via the Tax Cuts and Jobs Act, or TCJA, of 2017, there's currently a $10,000 limit on the SALT deduction, and raising that cap has been a priority for certain House lawmakers in high-tax states like New York, New Jersey and California. Filers must itemize deductions to claim the tax break for SALT.
If the House provision is enacted, the SALT cap would rise to $40,000, up from $30,000 in the previous plan, and phases out over $500,000, according to revised language released by the House Rules Committee. The provision would go into effect in 2025.
The SALT cap and income phaseout would increase annually by 1% from 2026 through 2033, according to the text.
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The revised text would also reduce itemized deductions for certain taxpayers in the 37% income tax bracket, which could reduce the benefit of the higher SALT cap.
For 2025, the top rate of 37% applies to individuals with taxable income above $626,350, and married couples filing jointly earning $751,600 or more.
However, the House proposal for changes to the SALT deduction could still face pushback in the Senate.
When filing taxes, you pick the greater of the standard deduction or your itemized deductions, including SALT capped at $10,000, medical expenses above 7.5% of your adjusted gross income, charitable gifts and others.
Starting in 2018, the Tax Cuts and Jobs Act doubled the standard deduction, and it adjusts for inflation yearly. For 2025, the standard deduction is $15,000 for single filers and $30,000 for married couples filing jointly. These could increase under the House-proposed tax bill.
Under the current thresholds, the vast majority of filers — roughly 90%, according to the latest IRS data — use the standard deduction and don't benefit from itemized tax breaks.
"Any changes to lift the cap would primarily benefit higher earners," Garrett Watson, director of policy analysis at the Tax Foundation, wrote in an analysis on Tuesday.
With an income phaseout over $400,000, the top 20% of taxpayers "would be the only group to meaningfully benefit," Watson wrote.
But members of the so-called "SALT Caucus" argue the SALT deduction limit is a middle-class issue in their districts.
Rep. Josh Gottheimer, D-NJ., co-chair of the SALT Caucus, told CNBC's "The Exchange" on Tuesday that a full repeal of the $10,000 SALT deduction limit would be a "huge tax cut and benefit for middle-class families around the country."
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