President Donald Trump’s “big beautiful bill” temporarily raised the limit on the federal deduction for state and local taxes, known as SALT, from $10,000 to $40,000 for 2025.
But some residents of certain states could see a bigger tax benefit, according to a Redfin report released last week.
The results are “in line with what you might expect,” and there is “a sizable benefit to residents of certain states,” said Chen Zhao, head of economics research for Redfin.
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Trump’s 2017 tax cuts capped the SALT deduction at $10,000. Before 2018, the SALT deduction — including state and local income taxes, and property taxes — was unlimited. But the so-called alternative minimum tax reduced the benefit for some wealthy homeowners.
You must itemize tax breaks, rather than claim the standard deduction, to benefit from SALT. During tax year 2022, only 10% of filers itemized deductions, and those taxpayers were more likely to be higher earners, according to the latest IRS data.
Here is where taxpayers could see the biggest benefit from the $40,000 SALT deduction cap for 2025.
Trump’s legislation temporarily raised the SALT deduction limit to $40,000 starting in 2025. That benefit starts to phase out, or decrease, for consumers making more than $500,000. Both figures will increase by 1% yearly through 2029, and the higher deduction limit will revert to $10,000 in 2030.
But itemizers in certain states could see a greater benefit, according to the Redfin report. Here are the 5 states where residents could see the biggest median savings from the new law.
New York: $7,092
California: $3,995
New Jersey: $3,897
Massachusetts: $3,835
Connecticut: $3,133
Meanwhile, these five states are where itemizers would see the smallest median savings from Trump’s law.
South Dakota: $1,033
Alaska: $1,052
Nevada: $1,090
Tennessee: $1,097
New Hampshire: $1,101
To estimate savings, Redfin calculated how much the typical impacted homeowner could deduct under the new SALT legislation. Then, they applied the 24% marginal tax rate to the amount over the previous $10,000 SALT cap.
However, this is “very much a simulation,” with a lot of assumptions, including property values, estimates for property taxes and estimates for state income taxes, Zhao said. The report does not consider local income taxes, which can vary significantly by jurisdiction.
A separate report released by the Bipartisan Policy Center in May also analyzed which states benefit most from the SALT deduction, based on the number of residents paying SALT, and where taxpayers have the largest SALT deductions.
In 2022, the average SALT deduction was close to $10,000 in states such as Connecticut, New York, New Jersey, California and Massachusetts, according to the analysis, based on the latest IRS data. The bottom five were Wyoming, Tennessee, Nevada, North Dakota and South Dakota.
Those higher averages suggest a large portion of taxpayers claiming the deduction came close to the $10,000 cap, the researchers wrote.