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As tax season begins, many filers are expecting larger refunds thanks to retroactive changes enacted in President Donald Trump’s “Big and Beautiful Bill.” Experts say the expansion of tax breaks, in particular, could result in huge profits for some filers.
The law increased the federal deduction limit for state and local taxes, known as SALT, from $10,000 to $40,000 for 2025. Filers must itemize their tax deductions rather than claim the standard deduction to benefit from the higher SALT limits. Once your income exceeds $500,000, your benefits will begin to phase out or be reduced.
“Much of the increase in refunds (on 2025 returns) is due to the increase in the SALT cap,” Andrew Lautz, director of tax policy at the Bipartisan Policy Center, a nonprofit think tank, told reporters on a conference call last week.
Prior to 2018, the SALT deduction, which included property taxes and either state and local income or sales taxes (but not both), was unlimited. But President Trump’s 2017 bill capped the deduction at $10,000 until 2025.
Since the 2017 changes, loosening the cap on the SALT deduction has become a key issue for some lawmakers in high-tax states such as New York, New Jersey and California. The 2017 law also doubled the basic deduction and reduced the number of itemized filers.
Based on the most recent IRS data, nearly 90% of returns used the standard deduction during the 2022 tax year. In the same year, approximately 15 million returns claimed the SALT deduction, less than 10% of returns.
The latest SALT deduction limit changes are expected to primarily benefit high-income earners, according to a May analysis of various proposals from the Tax Foundation. The SALT deduction limit increases by 1% each year until 2029, returning to $10,000 in 2030.
Who benefits from higher salt deductions
President Trump’s bill also increases the standard deduction for 2025 to $15,750 for single filers and $31,500 for married couples filing jointly.
This means that the total of your itemized deductions, including salt, limited charitable contributions, medical expenses, and other tax breaks, must exceed these thresholds. Otherwise, you will not receive the benefits. But experts say the $40,000 SALT cap means more filers may itemize their 2025 returns.
“This is a big deal, especially for clients in states with high income and property taxes,” said Tommy Lucas, a certified financial planner with Moisand Fitzgerald Tamayo in Orlando, Florida. His firm ranks No. 69 on CNBC’s 2025 100 Financial Advisors list.
However, the benefits of higher SALT deductions can vary widely by location based on property and income taxes.
The average SALT deduction in 2022 was nearly $10,000 in states including Connecticut, New York, New Jersey, California and Massachusetts, according to a May analysis by the Bipartisan Policy Center. These numbers suggest that “the majority of taxpayers claiming the credit are reaching the $10,000 limit,” the researchers wrote.
Meanwhile, the states and districts with the highest rates of SALT claimants were Washington, DC, Maryland, California, Utah, and Virginia, the analysis found.
