SALT Deduction Cap Update: Good News for Homeowners and Real Estate Investors

The latest federal tax reform has brought encouraging news for homeowners and real estate investors. The newly expanded State and Local Tax (SALT) deduction cap will allow more people to benefit from significant federal tax savings tied to homeownership.

What’s Changed with the SALT Deduction

Under the recent H.R. 1 tax reform, officially titled the One Big Beautiful Bill Act, the SALT deduction limit has increased from $10,000 to $40,000 beginning in the 2025 tax year.

That means many more taxpayers can now deduct a larger portion of the state and local taxes they pay  including property taxes  when filing their federal returns.

However, there’s one catch: the marriage penalty remains. The $40,000 limit applies whether you’re filing individually or jointly as a married couple.

For higher-income earners with a modified adjusted gross income (MAGI) above $500,000, the deduction begins to phase out gradually. For example, someone earning $550,000 would see their deduction reduced to $25,000 instead of the full $40,000.

A Gradual Increase Over the Next Four Years

The new tax law also builds in small annual increases to the SALT cap and income thresholds through 2029. For example:

• In 2026, the limit rises to $40,400 and the threshold to $505,000.

• In 2027, it increases again to $40,804 and $510,050, and so on.

This gradual adjustment will continue until 2029, helping to keep pace with inflation and income growth.

Why This Matters for Homeowners and Investors

For homeowners, this change means lower tax bills and renewed access to a key tax benefit that had been capped for years. Many buyers will now find it more financially attractive to purchase and maintain a home  especially in high-cost areas.

Real estate investors also stand to gain. The higher deduction limit allows them to offset more property tax expenses, improving cash flow and overall investment returns.

According to Shannon McGahn, Executive Vice President and Chief Advocacy Officer at the National Association of REALTORS® (NAR), the organization worked extensively with Congress to demonstrate how the old cap hurt homeowners. “Limiting the SALT deduction essentially forced homeowners to pay federal tax on income already spent on state and local taxes,” McGahn said.

What’s Next

The current SALT cap expansion runs through 2029, but unless Congress acts, it will revert back to $10,000 in 2030.

NAR leaders have made it clear they will continue to advocate for maintaining or even expanding the deduction. “SALT relief is essential to making homeownership more affordable and strengthening communities nationwide,” McGahn added.

As Evan Liddiard, NAR’s Director of Federal Tax Policy, put it: “Raising or eliminating the SALT cap has been a long-term priority. Our goal is a fairer tax policy that reflects the realities faced by homeowners in every region.”

The Bottom Line

For now, this is welcome relief for millions of Americans — especially middle-class homeowners in higher-tax states. The expanded SALT deduction is another reason why real estate remains a powerful path to building long-term financial security.

📚 Inspired by original reporting from REALTOR® Magazine and the National Association of REALTORS®.