How a $40K SALT Cap Could Unlock Big Savings for NYC Property Owners

What Is a SALT Deduction?

The State and Local Taxes (SALT) deduction allows taxpayers to deduct certain state and local taxes from their federal taxable income if they itemize deductions. For most New York City homeowners, where state income tax, property tax, and vehicle registration fees can add up quickly, the SALT deduction can be a meaningful way to offset high tax bills. Eligible items include:

• State and Local Income Taxes (or sales taxes, but not both)
• Real Estate Property Taxes
• Personal Property Taxes (e.g., on vehicles)

What Does Not Qualify as a SALT Deduction?

According to the IRS, the following taxes and fees cannot be included in your SALT deduction:

• Federal Income Taxes
• Social Security, Medicare, or other payroll taxes
• Transfer taxes (e.g., New York City real estate transfer tax when you sell a home)
• Homeowner’s Association (HOA) fees (i.e., common charges or maintenance fees)
• Estate and Inheritance Taxes
• Utility service charges (water, sewer, trash collection)

What Could Change?

• Current Cap: Since 2018, the Tax Cuts and Jobs Act (TCJA) has capped the SALT deduction at $10,000 per tax return, whether you file single, jointly, or as head of household. That cap significantly limits deductions in high-tax states like New York.
• Coming Expiration: That $10,000 cap was written into TCJA to expire after the 2025 tax year (i.e., for the 2025 return you file in 2026), unless Congress extends or modifies it.
• Recent House Proposal: In April 2025, the U.S. House of Representatives approved a bill to raise the SALT cap to $40,000 per return (subject to final Senate approval). However, negotiations in the Senate have suggested a possible compromise around $30,000. As of late May 2025, the Senate is actively debating final language, some expect a $30,000 threshold, while others still push for $40,000. A final vote is expected before the summer recess. If anything passes, it would apply to the 2025 tax year (returns filed in early 2026).

Because the legislative path isn’t yet certain, New York homeowners should be prepared for a few scenarios: (1) the $10,000 cap remains, (2) the cap increases to $30,000, or (3) the cap increases all the way to $40,000. We’ll continue to monitor the latest, but for now, this article illustrates the benefit if a $40,000 cap goes into effect for 2025 returns.

Current vs. Raised SALT Deduction Example

Let’s walk through a simple single-filer example to show how much more someone could deduct if the cap rises to $40,000 instead of staying at $10,000.

• State and Local Income Taxes: $7,500
• Real Estate Property Taxes: $9,000
• Personal Property Tax (e.g., vehicle registration): $800
• Total SALT-eligible Taxes: $17,300

Because the TCJA cap is $10,000, Jane can only deduct $10,000 of that $17,300. In contrast, the 2024 standard deduction for a single filer is $13,850, so this filer would take the $13,850 standard deduction instead of itemizing her $10,000 SALT. In other words, with today’s rules, this filers out-of-pocket tax payments ($17,300) get capped at $10,000, which is still lower than the $13,850 amount they'd get by taking the standard deduction.

If the SALT cap rose to $40,000 for the 2025 return (covering 2024 taxes), this filer could suddenly deduct the full $17,300. Because $17,300 exceeds the $13,850 standard deduction, they'd choose to itemize and deduct that full $17,300, netting $3,450 more in deductions than they would with the standard deduction under today’s cap.

The Standard Deduction vs. SALT

A higher SALT cap becomes most valuable when it exceeds the standard deduction. In that case, taxpayers in high-tax regions like New York can itemize and get a larger write-off. Below is a comparison for the 2024 tax year (returns filed in 2025), showing the standard deduction next to the maximum SALT deduction if the cap were $40,000. We also highlight the potential incremental benefit—that is, how much more you’d deduct versus the standard deduction if your SALT bills indeed reach or exceed $40,000.

_{*Assumes total SALT liability (state & local income + property + personal property taxes) meets or exceeds $40,000. Actual benefit = (Actual SALT paid, capped at $40,000) minus (Standard Deduction).}

Why This Matters for NYC Couples

Consider a married couple in Queens who paid $18,000 in state income tax and $22,000 in combined New York State + New York City property tax in 2024, so $40,000 total SALT. Under the existing $10,000 cap, they can only deduct $10,000, making their standard deduction of $27,700 the higher option. If the cap rises to $40,000, they could itemize the full $40,000 instead of taking $27,700, netting $12,300 more in deductions. That $12,300 reduction in taxable income could yield a $3,000–$4,000 tax savings, depending on their bracket.

What It Could Mean for Buyers

Before the $10,000 SALT cap went into effect in 2018, taxpayers with adjusted gross income over $100,000 accounted for 91 percent of all SALT deductions, and those households were heavily concentrated in six high-tax states (New York, New Jersey, California, Pennsylvania, Texas, and Illinois). In New York specifically, many buyers face monthly mortgage payments, high property taxes, and state income taxes that add up. A higher SALT cap can:

• Increase Buying Power:

  • By lowering taxable income more than under today’s cap, buyers free up after-tax dollars to allocate toward down payments, closing costs, or monthly mortgage payments.

  • Example: If an NYC couple pays $40,000 in SALT and itemizes under a $40,000 cap, they reduce taxable income to a greater extent than if they had taken the $27,700 standard deduction. That extra $12,300 in deductions could lower taxes owed by $3,000–$4,000. In many mortgage calculators, a $3,000 annual tax saving can translate to roughly $250 per month in additional home-buying budget (depending on interest rates).

• Improve Affordability in High-Tax ZIP Codes:

  • Buyers who might have once avoided listings in neighborhoods with exceptionally high property assessments (e.g., some parts of Manhattan or Brooklyn) may reconsider. When you know your property tax is partially shielded at a higher cap, the after-tax cost of ownership feels more manageable.

• Encourage First-Time Buyers to Enter the Market:

  • Many first-time buyers juggle student loans, rent, and escalating housing costs. A larger SALT deduction can make the difference between qualifying for a loan or not, if the tax savings push someone’s effective debt-to-income ratio lower.