Tax Season Surprise: Trump’s SALT Shake-Up Could Mean Bigger Refunds for Some—But Who Really Wins?
As tax season kicks into high gear, a surprising twist in President Donald Trump’s "big beautiful bill" is set to shake up refunds for many Americans. But here’s where it gets controversial: the expanded State and Local Tax (SALT) deduction limit could mean a significant windfall for certain taxpayers, but not everyone is cheering. Let’s break it down in a way that even tax novices can understand.
For the 2025 tax year, the federal SALT deduction limit has been raised to $40,000, up from the previous $10,000 cap. This change, part of Trump’s 2017 tax overhaul, is retroactive and has experts buzzing. And this is the part most people miss: to benefit from this higher limit, filers must itemize their deductions instead of taking the standard deduction. However, the perk starts to shrink for those earning over $500,000.
Andrew Lautz, director of tax policy at the Bipartisan Policy Center, recently told reporters, "A lot of what’s going to drive higher refunds [for 2025 returns] is the higher SALT cap." But why does this matter? Before 2018, the SALT deduction—which covers property taxes plus either state and local income or sales taxes—was unlimited. Trump’s 2017 legislation capped it at $10,000, a move that sparked outrage in high-tax states like New York, New Jersey, and California.
Here’s the kicker: the 2017 law also doubled the standard deduction, drastically reducing the number of filers who itemize. In 2022, nearly 90% of returns opted for the standard deduction, while only about 15 million (less than 10%) claimed the SALT deduction. The latest change is expected to primarily benefit higher earners, according to the Tax Foundation, though the limit will gradually increase by 1% annually until 2029, reverting to $10,000 in 2030.
Who stands to gain? For 2025, the standard deduction has also risen to $15,750 for single filers and $31,500 for married couples filing jointly. This means your itemized deductions—including SALT, charitable gifts, and medical expenses—must exceed these thresholds to make itemizing worthwhile. However, the $40,000 SALT cap could encourage more filers to itemize, especially in high-tax states.
Tommy Lucas, a certified financial planner at Moisand Fitzgerald Tamayo, notes, "This is a big one, especially for my clients in high-income or property tax states." But the benefits aren’t evenly distributed. In 2022, states like Connecticut, New York, and California saw average SALT deductions near $10,000, indicating many taxpayers were hitting the old cap. Meanwhile, Washington, D.C., Maryland, and Utah had the highest share of SALT claimants.
The controversial question remains: Is this change a fair boost for high-tax state residents, or does it disproportionately favor the wealthy? Let us know your thoughts in the comments. As tax season unfolds, one thing’s clear: understanding these changes could mean the difference between a modest refund and a substantial one.
