Senate Republicans’ version of President Donald Trump’s “big, beautiful” sweeping tax bill would keep a popular property tax deduction limited to $10,000, drawing the ire of lawmakers from high-tax states such as New Jersey and New York and setting up a collision course with the House GOP bill.
In May, the U.S. House of Representatives narrowly approved its version of the tax megabill, which would set the cap at $40,000 for state and local property tax deductions, more commonly referred to as the SALT deduction, for those earning up to $500,000 a year.
The SALT deduction was capped at $10,000 as part of the 2017 Tax Cuts and Jobs Act, a limit that was included by Republicans in the Senate Finance Committee’s version of the 2025 tax bill released on June 16.
Critics say the cap has targeted — and hurt residents in — often Democratic-leaning states with high property taxes, such as New Jersey, California and New York…
What the SALT deduction is
The SALT deduction lets people reduce the amount of their annual income that can be taxed by the federal government by subtracting how much they pay in state income taxes and local property taxes.
The deduction has existed since 1913, the Congressional Research Service said.
The current $10,000 cap on the deduction is set to expire at the end of this year, along with other tax cuts and provisions of the 2017 tax bill.
2017 tax bill increased other deductions
The 2017 tax bill also nearly doubled the standard deduction from $6,500 to $12,000 for individual filers and from $13,000 to $24,000 for joint returns, said the nonpartisan Tax Policy Center.
“What Trump and Congress did at that point was dramatically increase the standard deduction but decreased the amount you could deduct for state and local taxes,” said Marc Pfeiffer, a senior policy fellow at Rutgers University’s Bloustein School of Planning and Public Policy, who studies local government in New Jersey.
SALT deduction: Tax relief or a tax break for the wealthy
Progressives, including Sen. Bernie Sanders, a Vermont independent who caucuses with Democrats, have decried the SALT deduction as a tax break for the wealthy.
Most of the tax relief from lifting the SALT cap, for instance, would go to households earning between $200,000 and $500,000, said a February 2024 report from the Tax Foundation, a center-right think tank in New York City.
The nonpartisan Committee for a Responsible Federal Budget said eliminating the $10,000 cap on the SALT deduction, which some have pushed, “would be costly, distortionary and regressive.”
“Most households don’t have $10,000 in state and local taxes,” said Peter Chen, an analyst with New Jersey Policy Perspective, a progressive think tank. “When you think about who’s going to benefit the most from lifting the cap, it’s the people who are in the highest income bracket.”
Defenders of the SALT deduction argue that most of those who benefit are middle-income homeowners, even if the largest individual savings would go to the wealthiest.
The progressive Institute on Taxation and Economic Policy said in 2021 that 80% of the 1.9 million New Jersey residents who would see a benefit from removal of the cap had average incomes of up to $216,000.
Most of the tax increases from restricting the SALT deduction affected “cops, firefighters and teachers,” Gottheimer said in an interview last year.
“This is a middle-class issue,” he added.
Northjersey.com, June 18, 2025