The SALT Cap Explained
The Tax Cuts and Jobs Act of 2017 capped the state and local tax (SALT) deduction at $10,000 per year ($5,000 for married filing separately). This cap includes the combined total of state income taxes (or sales taxes) and property taxes. Before the cap, homeowners in high-tax states could deduct unlimited amounts, often claiming $20,000 to $40,000 or more in SALT deductions.
For homeowners in states with high income taxes and high property taxes — think New Jersey, Connecticut, California, and New York — the $10,000 cap means a significant portion of their property taxes is no longer deductible. A homeowner paying $12,000 in property taxes and $8,000 in state income taxes has $20,000 in SALT but can only deduct $10,000.
Who Is Affected Most
The SALT cap primarily affects homeowners with property tax bills above $10,000, or those whose combined state income and property taxes exceed $10,000. This disproportionately impacts homeowners in the Northeast, California, and Illinois, where both property values and tax rates are high. Homeowners in low-tax states like Florida, Texas, and Nevada feel minimal impact because their total SALT is more likely to fall within the cap.
Additionally, the higher standard deduction introduced alongside the SALT cap means many homeowners now benefit more from the standard deduction than from itemizing. For 2025, the standard deduction is approximately $15,200 for single filers and $30,400 for married couples filing jointly. If your total itemized deductions fall below these thresholds, itemizing to claim property tax deductions does not save you money.
Strategies to Maximize Your Deduction
If you are near the itemization threshold, bunching deductions into a single year can help. For example, prepaying property taxes (paying the next year's taxes in December) concentrates deductions in one tax year, potentially pushing you above the standard deduction threshold. Charitable contributions can be similarly bunched through donor-advised funds.
If you run a home business, the portion of property taxes allocable to your home office space may be deductible as a business expense outside the SALT cap. Consult a tax professional to determine eligibility and proper allocation.
The Future of the SALT Cap
The SALT cap is scheduled to expire after 2025 under current law, which would restore unlimited SALT deductions. However, this is subject to congressional action and may be extended, modified, or made permanent. The political dynamics around SALT involve competing interests between high-tax and low-tax states, making the outcome uncertain.
Planning Around Uncertainty
Do not make major financial decisions based on assumptions about future SALT changes. Budget based on current law, and if the cap is lifted, treat the additional deduction as a bonus. Use our property tax data to understand your current tax burden and plan accordingly.