Where — and for whom — Trump’s higher SALT deduction cap has the most impact

The recently passed One Big Beautiful Bill Act (OBBBA) gave Americans a huge tax cut that critics say primarily benefits the wealthy. But the law contains a rare reversal from President Donald Trump on a key issue — the state and local tax (SALT) deduction.

What the deduction does is all in the name. It allows taxpayers to deduct what they owe in state and local taxes from their federal income taxes. The OBBBA raises the cap on how much taxpayers can claim under the SALT deduction.

It’s a rare change of direction from Trump in that the cap on the SALT deduction was implemented by the Tax Cuts and Jobs Act (TCJA) of 2017 — the similarly massive reorganization of the federal tax code signed during his first term in office.

TCJA capped the SALT deduction at $10,000 for married couples and $5,000 for individual filers, while the OBBBA raised the cap to $40,000 for married couples and $20,000 for those filing individually.

Capping the SALT deduction effectively raises people’s taxes, but it doesn’t impact every taxpayer equally. It’s inherently tied to people living in states and cities with higher tax rates. And these areas tend to be in states and cities where Democrats win elections.

According to 2022 data from the Bipartisan Policy Center, the 13 states where residents claim the highest average SALT deduction all voted against Trump in both 2016 and 2024. These states are led by Connecticut ($9,155), New York ($9,085), New Jersey ($9,013), California ($8,894) and Massachusetts ($8,881).

But the SALT deduction was just one piece of the TCJA. It also roughly doubled the standard deduction to $12,000 for single filers and $24,000 for couples. For residents of high-tax states, this helped offset the cap on the SALT deduction.

“If you’re particularly wealthy in California or New York, your state income tax bill plus your local property tax bill is [high],” said Andrew Lautz, a researcher with the Bipartisan Policy Center. “Even though you might get a larger standard deduction, the wealthiest tax players are not making up the loss from the SALT cap.”

The OBBBA makes permanent the raised standard deduction in the TCJA, in addition to raising it slightly to $15,750 for individuals and $31,500 for couples filing together.

Whether SALT deduction is a good policy depends on who you talk to. People who think the tax code should have low tax rates and a broad tax base don’t like most itemized deductions, including the SALT deduction.

Meanwhile, some view state and local income taxes as double taxation when coupled with federal income taxes — and thus the SALT deduction eliminates this aspect of the tax code.

Lautz disagrees with that view of the SALT deduction on the basis of local taxes funding different services than federal taxes.

“State income and sales taxes are directed generally at state-specific spending and services that are often not provided at the federal level, like police officers, fire departments, local infrastructure,” he said.

“At the federal level, we’re funding the United States military, Social Security, Medicare, Medicaid, other entitlement programs and other national spending. So I think the double taxation argument has its limits.”