How changes to the SALT deduction affect your taxes

The so-called One, Big, Beautiful Bill Act brought sweeping changes to the country’s tax code, creating over $1 trillion in tax breaks while cutting funding to social safety net programs like Medicaid and the Supplemental Nutrition Assistance Program.

But one change stands out: A higher cap on the state and local tax deduction, which many Democratic lawmakers have pushed for since 2018.

For years, filers were able to deduct 100% of the state and local taxes that they paid. But in 2017, Republican lawmakers, under President Donald Trump’s first term, imposed a $10,000 limit on SALT deductions with the passage of the Tax Cuts and Jobs Act.

In the years that followed, many elected officials opposed the $10,000 cap, which remained in place under former President Joe Biden.

“It never should have been put in place to begin with,” Gov. JB Pritzker said at a news conference last July. “I think raising it is a good thing for the state of Illinois.”

The SALT deduction changes will most likely help wealthier taxpayers in high-tax states like Illinois, especially if they have many expenses to itemize. Because of Illinois’ high property taxes, some people who claimed the standard deduction may now find it worthwhile to itemize.

Under the old cap, 14.7% of Illinois homeowners had property tax bills that exceeded $10,000. In the Chicago metro area, that figure jumped to 21.8%, according to Realtor.com. Rising reassessments have made bills even higher, particularly on the South and West sides.

Here’s what you need to know about how the SALT deduction could affect your federal tax return.

Defining the SALT deduction

The SALT deduction helps prevent double taxation — ensuring filers aren’t paying federal tax on income already taxed by state and local governments, which helps support services like schools, roads and public safety. The deduction is only available to filers who itemize.

The tax break includes property taxes plus local and state income taxes, or state and local sales taxes. Filers have to choose between deducting income taxes or sales taxes; it can’t be both.

Trump’s new law increased the cap from $10,000 to $40,000 for most filers with up to $500,000 in household income.

The cap will increase annually by 1% through 2029, then fall back to $10,000 for the 2030 tax year. When a filer’s modified adjusted gross income reaches $500,000, the cap begins to phase out, reducing their deduction by 30% of their excess MAGI (modified adjusted gross income). But the cap doesn’t fall below, so filers who are fully phased out can still deduct up to $10,000.

Changes under Trump’s terms

During Trump's first administration, the SALT deduction raised more revenue to offset large tax cuts, placing greater costs on taxpayers in high-tax Democratic-leaning states such as California, New York and New Jersey.

“The tax cuts that Trump and the congressional Republicans wanted to put in place came with a price tag. … It was a way to essentially raise taxes on certain high net worth individuals by taking away or limiting a previous ability that they had to pay less in taxes,” said Justin Marlowe, municipal finance professor at the University of Chicago.

While the Tax Cuts and Jobs Act created a SALT cap, it nearly doubled the standard deduction, and about 30 million more people across the country opted to take the standard deduction rather than itemize, according to the Bipartisan Policy Center. Between 2017 and 2018, the standard deduction rose from $6,500 to $12,000 for single filers, from $13,000 to $24,000 for married filing jointly and from $9,550 to $18,000 for head of household.

The One, Big, Beautiful Bill Act, signed in July 2025, made many tax changes from the 2017 Tax Cuts and Jobs Act permanent, while introducing new tax breaks like "no tax on tips" and a senior deduction of up to $6,000 for those 65 and older.

Those most likely to benefit

The previous $10,000 cap made the SALT deduction far less relevant for most taxpayers, said Nikhita Airi, research associate at the Tax Policy Center.

The center estimates about 10% of taxpayers nationwide will benefit from it in 2026.

Middle- and high-income households are most likely to benefit, particularly in high-tax states such as California, New Jersey and New York, where residents pay more to finance state and local services.

Joel Berner, economist for Realtor.com, said the higher cap will make a big difference for some homeowners, especially in high-tax areas.

Illinois has some of the highest property taxes in the country, according to the Tax Foundation. In Cook County, the median property tax bill was $6,053, with median bills ranging from $6,000 to $8,000 across counties in northeastern Illinois.

“A lot of people pay high property taxes in the city and all over the suburbs, so this will allow more people to take advantage [and] get a higher deduction,” said Traci Wall, SALT manager at accounting firm RSM.

For some, the previous cap “didn’t even cover all their property taxes, and they lost out on the state income tax deduction,” she said.

Studies have indicated that raising the SALT cap could increase homeownership rates and lead people to spend more on property purchases or renovations, thereby increasing property values. Berner said he believes it will boost home values in Chicago and Illinois.

“When you’re not paying the same amount of property taxes, those savings get capitalized into the value of the home. People with more money in their pockets may be more willing to move. People who’ve been sitting on artificially low tax appraisal values and don’t want to give that up might now be more willing to move, so we anticipate a little more inventory for sale, slightly higher prices and more activity,” Berner said.

But it could have mixed effects on housing affordability, as higher-income taxpayers may now be less interested in moving, Marlowe said.

“It becomes a concern because you’ve given people who own property an additional incentive to stay in their properties and invest and drive property values up, and that certainly is not going to help the affordability problem in a lot of communities,” he said.

Whether SALT deductions encourage people to move to higher property tax jurisdictions is unclear, he added.

Itemize vs. the standard deduction

Many take the standard deduction because it’s easier, requiring less work to document every expense.

For the 2025 tax year, the standard deduction increased to $15,750 for singles, $23,625 for heads of household and $31,500 for joint households.

But recent changes may make itemizing more appealing to households facing a higher property tax burden, said Mark Mirsky, certified public accountant and tax partner at Aprio.

In addition to the SALT deduction, Illinois taxpayers can deduct their home’s mortgage interest, some medical expenses, charitable contributions and other expenses allowed by the IRS.

Since the president's tax and spending bill passed before the IRS updated its federal tax withholding tables, many tax filers will likely receive bigger refunds than usual this year, Mirsky said. But whether individual taxpayers actually benefit from the new SALT cap depends on how much they can itemize beyond the standard deduction, he said.

“I think that many taxpayers in their heads are thinking, ‘I’m paying less tax, given the new bill,’ but it’s clearly situational," he said. "Refunds just mean you had more taken out of a check or that you paid the government more than you should have in advance.”

Things to consider when taking the SALT deduction

If you’d like to claim the SALT deduction, Wall said it’s time to start documenting everything, from charitable contributions to mortgage interest and property tax statements.

“If your income taxes [and] property taxes are going to put you over [the standard deduction] or near it, you may want to consider some additional charitable giving [and] getting that in a particular tax year,” she said.

If all of those combined don’t get you to the standard deduction, don’t itemize.

The SALT deduction also only benefits households with incomes below $500,000. Those above the income threshold may want to lower their modified adjusted gross income by contributing to retirement or health care savings accounts or documenting capital losses, Mirsky said.

Charitable giving will not reduce your adjusted gross income, but will increase your total itemized deductions and potentially provide a greater tax benefit for your giving.

Michael Thatcher, CEO of Charity Navigator, is seeing more donors bunch multiple years’ worth of charitable contributions into a single year to increase their itemized deductions, while taking the standard deduction in other years.

Bunching charitable donations rather than spreading them over multiple years allows filers to deduct the most in the long run.

Since 2022, many Illinoisans who own flow-through entities, such as partnerships or S corporations, have used the Pass-through Entity Tax to pay their state income taxes at the entity level while deducting them on their federal return, allowing them to deduct income above the cap. With the $40,000 SALT cap, Mirsky recommends speaking with a tax adviser to determine whether to continue this strategy.