Finance

What is the SALT cap? What could happen in 2025 and what it means for you

With a notable deadline on the horizon this year, questions linger over the future of the SALT cap, which was put in place during Trump's presidency in 2017

NBCDFW.com

Renewed questions surrounding the future of the SALT cap surfaced over the weekend as a meeting with President-elect Donald Trump made headlines, but what exactly is the SALT tax and what could be in store for 2025?

With a notable deadline on the horizon this year, questions linger over the future of the cap, which was put in place during Trump's presidency in 2017. And with tax season fast approaching, those questions are likely to increase.

Here's what to know about SALT and what's in store for 2025:

What is the SALT and what is the cap?

SALT stands for "state and local tax." According to the Tax Foundation, it's a deduction that "permits taxpayers who itemize when filing federal taxes to deduct certain taxes paid to state and local governments."

In 2017, the Tax Cuts and Jobs Act overhauled federal tax code, capping the SALT deduction at $10,000 per year for "property taxes plus state income or sales taxes."

Most of the changes made in TCJA, however, will expire on Dec. 31, 2025.

How does the SALT deduction work?

Under SALT, those who itemize their taxes can deduct up to $10,000 of "property, sales, or income taxes already paid to state and local governments."

According to experts, the deduction is mostly used in higher-tax states like New York, New Jersey and California.

According to the Joint Committee on Taxation, prior to the Tax Cuts and Jobs Act, a majority of the benefit from SALT deduction was claimed by people with an income of $100,000 or higher in six states, including Illinois.

What could happen next?

In a joint statement Saturday, Republican Congressman Andrew Garbarino of New York and Congresswoman Young Kim of California, co-chairs of the SALT Caucus, addressed a meeting they had with Trump earlier that day.

“Our constituents are burdened by the SALT cap, and President Trump committed to addressing this issue for our districts," the statement read. "We had a productive meeting tonight and will keep fighting to resolve this critical issue so our constituents can keep more of their hard-earned money.”

Trump has previously voiced his support for removing the SALT cap, despite it being put in place during his presidency.

In a Truth Social post in September, Trump said "I will turn it around, get SALT back, lower your Taxes, and so much more."

It's not clear yet how lawmakers would shift to allow for an unlimited SALT cap, or if they would instead raise the cap.

According to CNBC, some House Republicans are pushing their party's leadership to look at alternative payment methods like cutting the corporate tax rate from 21% to 15%.

Last week, Politico reported one proposal being discussed would allow married couples to deduct $20,000.

According to the Tax Policy Center, under that move, which it estimates would increase the federal debt by about $225 billion from 2025-2034, "nearly all the benefit would go to households making about $200,000 or more." Even then, the center said, the benefits would be small, with the average tax cut for married couples sitting at $270.

While some lawmakers have argued the SALT cap disproportionately impacts high-tax blue states, "some progressives and tax-policy experts have defended the cap, arguing that its repeal would mostly benefit the rich," CNBC reported.

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