The SALT Deduction Revival: How the “One Big Beautiful Bill Act” Bailed Out America’s Overtaxed Homeowners
/The SALT Deduction Revival: How the “One Big Beautiful Bill Act” Bailed Out America’s Overtaxed Homeowners
By: Geoffrey Rejent
Imagine this for a minute: You’re a hardworking law enforcement officer living on the East or West Coast, earning a solid six-figure income. You pay enough property taxes to personally fund a small town’s volunteer fire department annually, and your state income tax bill is even worse. For as long as you can recall, you’ve been getting crushed by taxes. You take your blows from the state and local governments, only to get hit again by Uncle Sam, who wouldn’t let you deduct more than $10,000 of those crippling state and local taxes. Naysayers may say, “It’s your choice to live there,” but let’s face it, can you really uproot your family midway through your career and move to a tax-friendly state? What about those who are near the end of the careers, just trying to hang on until they can secure their pension and leave their overtaxed state? Chances are that those faced with those situations will consider moving only when they are finally able to pack it in and retire. President Ronald Reagan once said that “The nine most terrifying words in the English language are,, ‘I’m from the government, and I’m here to help.’” Well, thanks to the One Big Beautiful Bill Act, the federal government has helped taxpayers in the high-taxed states.
On July 4th, 2025, President Trump signed the One Big Beautiful Bill Act into law. The law has a number of provisions and tax reductions for your average American. You can debate the merits of the bill, whether or not it will ultimately increase or decrease the national debt, etc. There is one major component of the bill that serves as a financial lifeline that millions of Americans in high-taxed states have been desperately waiting for: a temporary increase in the State and Local Tax (SALT) deduction. Prior to the passage and signing of the bill, the SALT deduction was capped at a mere $10,000. The bill now increases that number to $40,000, providing much-needed help to those living in high-taxed states.
What is the SALT Deduction, and Why Should You Care?
The SALT deduction allows taxpayers who itemize their deductions to subtract their state and local income taxes, sales taxes and property taxes from their federal taxable income. Think of this as the federal government saying to high-taxed state residents, “Hey, we recognize you’re already getting crushed by your state and local taxes. We aren’t going to do it, too.”Prior to 2018, there wasn’t a cap on this deduction. People who lived in high-taxed states like California, New York, New Jersey and Connecticut could deduct their entire state and local tax bill. When the Tax Cuts and Jobs Act (TCJA) of 2017 was signed into law during President Trump’s first presidential term, it created a $10,000 annual limit on SALT deductions. That meant that residents of those high-taxed states lost their federal tax deduction with the stroke of a pen. What was the result? Taxpayers who lived and worked in high-tax states suddenly found themselves paying thousands more in federal taxes, even as their overall tax bill continued to climb from a state and local tax standpoint. Residents of high-taxed states felt like they were being punished for living in states that happened to have robust public services, inflated budgets and higher tax rates. Worse yet, some politicians in these states have done little to help improve the rising taxes in these states.
The One Big Beautiful Bill Act brought about much-needed tax relief to high-taxed state residents. The new legislation temporarily provides a more generous deduction cap, increasing it from $10,000 to $40,000 from 2025 to 2029. There are some limitations to the SALT deduction. There is an income limit starting at $500,000, which phases out the generous deduction. The SALT deduction will take effect for the 2025 tax year and remain in force through 2029, with a 1% inflation adjustment after 2025.
To put this in perspective, here is an example of how this will benefit residents from high-taxed states. John is a municipal police officer living in Bergen County, New Jersey. He earns $130,000 annually, owns an $800,000 home of which he still owes $450,000 to his mortgage company, and pays about $25,000 in combined state income and property taxes. Under the old $10,000 SALT deduction cap, John could only deduct $10,000 of his $25,000 state and local tax bill, essentially leaving him feeling like his $15,000 was essentially taxed twice. How was he taxed twice? He paid the initial tax of $25,000 (a combination of the state or local tax), but he was still taxed on that $15,000 federally as well, even though the $15,000 was paid out of his pocket for taxes. What is the implication? Depending on his federal tax bracket, he could be paying an additional $2,500-$3,500 of federal taxes on money he didn’t get to keep. With the new $40,000 cap and assuming John itemizes his deductions, John can now deduct the entire $25,000 state and local tax bill, saving that $2,500-$3,500 per year in federal taxes. That’s a significant savings! It is important to note that the One Bill Beautiful Bill Act also changes the amounts of standard deductions. The bill increased the standard taxpayer deduction to $15,750 for single filers, $23,625 for head of household and $31,500 for joint filers, while also limiting other itemized deductions. If John is a single filer or even a head of household, it would make sense for him to itemize his deductions. If he is a joint filer, he may need to determine if any other deductions total up to a higher number than $31,500.
You might be asking how does this affect real estate markets?
The SALT deduction isn’t just about individual tax bills; it’s a major factor in real estate markets, particularly those located in high-tax areas around the country. Homebuyers often (and should) consider tax costs when buying a home. A higher SALT cap makes expensive homes in high-tax areas more financially attractive. This change is also very important for buyers looking to move into larger or nicer homes. Homeowners who are looking to sell their starter homes and purchase larger properties in desirable school districts will be motivated to buy these homes because of the tax savings. The enhanced deduction makes moving to a more expensive home more financially feasible. The higher limits on the SALT deduction may also slow the flow of families leaving high-taxed states. This is especially important for people who are moving toward retirement or those who are on a fixed income.
The changes to the SALT deduction represent more than just a tax policy modification. The modified SALT deduction is recognition that Americans living in high-taxed states are struggling and paying an astronomical amount of taxes. Families living in high-tax areas will now be able to keep more of their hard-earned money, which will provide more flexibility with how they handle the household finances. Whether you’re a current homeowner watching your tax bill shrink or a prospective buyer suddenly finding more homes within reach, the enhanced SALT deduction is reshaping the landscape of personal finance and real estate. After years of feeling penalized for living in states with high taxes and high home values, families finally have some breathing room.
Geoffrey J. Rejent is a Municipal Police Sergeant in New Jersey. He is currently in his 23rd year of service and is assigned to Special Operations. Prior to Special Operations, he was assigned to the Detective Bureau, Traffic Bureau and Patrol Division. He also currently serves as a Drug Recognition Expert and is a former Crash Reconstructionist. He holds a Bachelor’s Degree from Marist College and a Master’s Degree in Administrative Science from Fairleigh Dickinson University. He is also a Mortgage Loan Originator (NMLS 2624041) with One Real Mortgage (198414). You can reach Geoffrey J. Rejent by email at Geoffrey.Rejent@onerealmortgage.com or by Facebook at Geoffrey J. Rejent – For All of Your Mortgage Needs.
