A recent agreement in Washington has led to a significant change in the tax deduction cap for state and local taxes (SALT), which is particularly relevant for high-tax states like New Jersey. The new cap will be set at $40,000, a substantial increase from the previous $10,000 limit. This decision was reached over the weekend by Republican lawmakers as part of President Donald Trump’s legislative package known as the “Big Beautiful Bill.” This bill also encompasses tax cuts, Medicaid reforms, and border security funding.
The U.S. Senate narrowly passed the bill with a 51-49 vote, marking an important step forward. Lawmakers are targeting June 30 to finalize work on this legislation. The revised SALT deduction cap applies to individuals earning up to $500,000 annually and is scheduled to sunset after five years, reverting back to $10,000.
The initial $10,000 cap was introduced under the 2017 Tax Cuts and Jobs Act. Before that legislation, there was no cap on SALT deductions. Critics argue that the cap has adversely affected residents in Democratic-leaning states with high property taxes such as New Jersey, California, and New York.
The 2017 tax reform also increased other deductions significantly. According to the nonpartisan Tax Policy Center, it nearly doubled the standard deduction from $6,500 to $12,000 for individual filers and from $13,000 to $24,000 for joint returns.
Marc Pfeiffer of Rutgers University commented on these changes: “What Trump and Congress did at that point was dramatically increase the standard deduction but decrease the amount you could deduct for state and local taxes.”
Northjersey.com reported on these developments on June 30, 2025.
