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With tax season underway, many filers are expecting bigger refunds due to retroactive changes enacted in President Donald Trump’s “big beautiful bill.” One expanded tax break in particular could trigger a sizable windfall for certain filers, experts say.
For 2025, the legislation raised the federal deduction limit for state and local taxes, known as SALT, to $40,000, up from $10,000. Filers must itemize tax breaks rather than claiming the standard deduction to benefit from the higher SALT limit. The benefit starts to phase out, or get smaller, once income exceeds $500,000.
“A lot of what’s going to drive higher refunds [for 2025 returns] is the higher SALT cap,” Andrew Lautz, director of tax policy for the Bipartisan Policy Center, a nonprofit think tank, told reporters during a call last week.
Before 2018, the SALT deduction — which includes property taxes plus either state and local income or sales taxes, but not both — was unlimited. However, Trump’s 2017 legislation capped the deduction at $10,000 through 2025.
Since the 2017 change, SALT deduction cap relief has been a key issue for certain lawmakers in high-tax states like New York, New Jersey and California. The 2017 law also doubled the standard deduction, which slashed the number of filers who itemize.
During tax year 2022, nearly 90% of returns used the standard deduction, based on the latest IRS data. The same year, about 15 million returns claimed the SALT deduction, which is fewer than 10% of filings.
The latest SALT deduction limit change is expected to primarily benefit higher earners, according to a May analysis of various proposals from the Tax Foundation. The SALT deduction limit will increase by 1% per year through 2029 and revert to $10,000 in 2030.
Who could benefit from the higher SALT deduction
For 2025, Trump’s legislation also boosted the standard deduction to $15,750 for single filers and $31,500 for married couples filing jointly.
This means your combined itemized deductions, including SALT, limited charitable gifts and medical expenses and other tax breaks, must exceed these thresholds — or you won’t benefit. But the $40,000 SALT cap means more filers could itemize for 2025 returns, experts say.
“This is a big one, especially for my clients in high income tax or property tax states,” said Tommy Lucas, a certified financial planner at Moisand Fitzgerald Tamayo in Orlando, Florida. His firm is ranked No. 69 on CNBC’s Financial Advisor 100 list for 2025.
However, the higher SALT deduction benefit could vary significantly by location, based on property and income taxes.
In 2022, the average SALT deduction was near $10,000 in states such as Connecticut, New York, New Jersey, California and Massachusetts, according to a Bipartisan Policy Center analysis from May. Those figures suggest “that a large portion of taxpayers claiming the deduction bumped up against the $10,000 cap,” researchers wrote.
Meanwhile, the states and district with the highest share of SALT claimants were Washington, D.C., Maryland, California, Utah and Virginia, the analysis found.
