Episode 34 - New SALT Deduction Rules
New SALT Deduction Rules: Who Saves Thousands and Who Doesn’t
The Big Beautiful Bill is reshaping one of the most controversial tax provisions in recent years: the SALT deduction. Starting in 2025, the cap on state and local tax deductions will rise from $10,000 to $40,000 for married couples filing jointly — a change that could mean thousands in savings for some taxpayers, and absolutely nothing for others.
In this week’s episode of Full Throttle Finance™, we unpack exactly what this means, why the SALT deduction has been such a political flashpoint since 2018, and how these changes will impact households depending on where they live.
What Is the SALT Deduction?
SALT stands for State and Local Taxes. This deduction allows taxpayers who itemize to subtract certain taxes they’ve already paid — like state income tax, local income tax, and property tax — from their federal taxable income.
The idea is to prevent double taxation: money you’ve already paid to your state shouldn’t also be taxed at the federal level. But since 2018, a $10,000 cap has limited how much taxpayers can deduct, hitting high-tax states the hardest.
What Changes Under the Big Beautiful Bill
The new legislation increases the SALT cap to:
$40,000 for joint filers
$20,000 for single filers
There’s also an income phase-out, which means households earning over $500,000 (joint) or $250,000 (single) will see the benefit shrink.
Real-Life Impact: Two Very Different Outcomes
Here’s the catch — not everyone benefits.
High-Tax State Example: A married couple earning $250,000 pays $15,000 in state income tax and $18,000 in property tax — a total of $33,000. Under the old rules, only $10,000 was deductible. Under the new cap, they can deduct the full $33,000, saving over $5,500 in federal taxes.
Low-Tax State Example: Another married couple earning the same $250,000 pays only $6,000 in property taxes in a no-income-tax state. They were already under the $10,000 cap, so the new rule changes nothing.
Same income. Very different results.
Why This Matters
The new SALT deduction isn’t a universal win. It provides relief to taxpayers in states like New York, New Jersey, California, and Illinois — while taxpayers in low-tax states won’t feel any difference at all.
This makes the SALT deduction one of the most location-dependent provisions in the U.S. tax code — a reminder that where you live can matter as much as how much you earn.
🎧 Listen to the Full Episode
Want the full breakdown and our take on what this means for taxpayers, states, and future policy debates? Listen to the full episode of Full Throttle Finance™ below.
