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A new tax deal in Washington could bring long awaited relief to homeowners in high tax states—all it needs now is the President Trump’s signature.
Lawmakers have agreed to raise the federal cap on state and local tax (SALT) deductions from $10,000 to $40,000 starting in 2025. The proposal is a big win for blue-state Republicans who have long argued that the current cap unfairly penalizes residents in states like New York, New Jersey, and California.
The SALT deduction limit—originally imposed under the 2017 Tax Cuts and Jobs Act—restricts how much homeowners can deduct in property and state income taxes on their federal returns. While the cap is scheduled to expire in 2026, the new legislation would temporarily raise the ceiling, with a $40,000 cap that gradually phases out for those earning more than $500,000. Both the cap and the phaseout threshold would rise 1% annually through 2029 before reverting to $10,000 in 2030.
The proposal has proven pivotal: Initial versions of the tax bill were blocked by internal party disagreements, with SALT relief emerging as a key bargaining chip. Now that a deal has been struck, the next question is which areas stand to benefit most from this tax break.
(Alex Wong/Getty Images)
Why New York fought so hard to raise the cap
Few states have more riding on the future of the SALT deduction than New York. With some of the highest property taxes in the country and a high-income tax rate layered on top, New York residents are disproportionately affected by the current $10,000 cap on state and local tax deductions.
The numbers speak for themselves: Roughly 1 in 4 properties in New York have property tax bills that exceed the $10,000 limit—meaning those homeowners are already maxing out the deduction. The impact is even more dramatic in and around the New York City metro area, which includes parts of northern New Jersey. Nearly half of homeowners in this region face property tax bills above the $10,000 threshold, making them some of the hardest-hit in the nation under the current SALT cap.
As Rep. Nick LaLota and others argued, any meaningful federal tax reform must acknowledge the real burden facing homeowners in states like New York, where five-figure tax bills are the norm, not the exception. To address that, he proposed raising the deduction to $62,000 for single filers and $124,000 for joint filers.
Impact of SALT deductions on affordability
Property taxes have been something of an albatross around the neck of homeowners. After the equity boom following the COVID-19 pandemic pushed home prices (and tax assessments) to new heights, homeowners have been left footing the bill for higher taxes.
Many state and local governments have responded by passing exemptions that lower the taxable value of homes, particularly for seniors and longtime residents who have owned their homes for decades or more. But there hasn’t been the kind of national relief that could provide a meaningful resolution for U.S. homeowners now sitting on (and paying taxes on) $35 trillion of residential real estate wealth.
Enter the SALT cap.
The federal limit on state and local tax deductions has been a sore spot for homeowners in high-tax states where their annual property tax bill exceeds the $10,000 threshold. Removing or raising that cap could offer much-needed breathing room.
But the implications go beyond individual tax bills. Easing the SALT deduction limit could also help unstick a sluggish housing market by unlocking more buying power.
“This deduction could also help some owners move up,” explains Realtor.com® senior economist Joel Berner. By boosting buying power, the expanded deduction could motivate some homeowners to part with their historically low mortgage rates and move into the new home they want or need—freeing up inventory for other hopeful buyers.
How much could it help? Berner offers a scenario:
“Suppose someone owns a $1,000,000 home and decided to put all the tax savings into the monthly mortgage payment for their next home—that $7,000 per year would increase their home price budget to about $1.1 million, or 10%.”
In a tight market where affordability is stretched and inventory is limited, that kind of financial flexibility could be the nudge both sellers and buyers need.
Who could most benefit
Relief won’t be equally felt across the country. That’s because some states and counties have much lower property values and tax rates, so homeowners don’t pay over the current $10,000 cap.
Take Daniel Cabrera, founder and CEO of Fire Damage House Buyer, for example. As a resident of San Antonio, TX, he pays about $7,000 a year in property taxes—well within the current limit of SALT deductions.
But his New Jersey–based parents pay roughly $17,000 a year in property taxes.
“With the present $10,000 SALT limit and 35% federal income tax rate, they lose the ability to claim about $7,000,” he explains.
That $7,000 hits especially hard as his parents near retirement.
“There’s been just constant conversations about them coming down here to Texas,” he says. That’s because Texas not only has a lower overall property tax burden than New Jersey, but also offers a range of local exemptions for seniors that can significantly reduce their tax bills.
What areas would benefit most?
Who will benefit from SALT deductions largely depends on where they live and what their current tax burden is. An analysis from Realtor.com pinpoints the top five states and 10 metro areas with the highest share of properties that exceed the current SALT cap.
The top 5 states that would benefit most
| State | Share of properties with tax bills over $10K |
| NJ | 39.9% |
| NY | 25.9% |
| CT | 19.4% |
| CA | 19.3% |
| MA | 18.4% |
The top 10 metros that would benefit most
| Metropolitan Statistical Area | Share of properties with tax bills over $10K |
| San Jose-Sunnyvale-Santa Clara, CA | 47.9% |
| New York-Newark-Jersey City, NY-NJ | 47.8% |
| San Francisco-Oakland-Fremont, CA | 40.9% |
| Bridgeport-Stamford-Danbury, CT | 39.3% |
| Kiryas Joel-Poughkeepsie-Newburgh, NY | 37.5% |
| Trenton-Princeton, NJ | 35.8% |
| Nantucket, MA | 35.5% |
| Austin-Round Rock-San Marcos, TX | 32% |
| Jackson, WY-ID | 28.7% |
| Santa Cruz-Watsonville, CA | 28.1% |
What comes next
The proposed budget now returns to the House for final approval before heading to President Donald Trump’s desk. The president has signaled his desire to sign the bill into law before the July 4th holiday.
But homeowners don’t have to wait for federal tax relief.
A Realtor.com analysis found that nearly 40% of Americans might be overpaying on property taxes—and could save money by appealing their tax assessments. A new tool makes the process easier: Homeowners can compare their property’s assessed value to similar nearby homes and use that data as evidence in their appeal. It’s a simple, data-driven way to push back against rising tax bills, no legislation required.