The new tax legislation increases the state and local tax (SALT) deduction cap from $10,000 to $40,000, greatly benefitting wealthy taxpayers in high-cost states. Taxpayers earning more than $200,000 are more likely to itemize deductions compared to those earning less. States like California and New York, with many high-income earners, will see the largest benefits. In contrast, the bottom 80% of earners will see no benefits from the changes, as they generally do not pay sufficient state or local taxes that exceed the previous cap.
The new tax legislation increases the state and local tax (SALT) deduction cap from $10,000 to $40,000, overwhelmingly benefiting wealthy taxpayers in high-tax states.
Analysis from the Bipartisan Policy Center reveals that while 7% of taxpayers earning under $200,000 itemized deductions in 2022, that figure rose to 38% for those earning over $200,000.
The legislation disproportionately benefits taxpayers in California, Illinois, New Jersey, and New York, where tax rates and costs of living are high, mainly affecting high-income households.
The bottom 80% of earners will not see any tax benefit from the increased SALT cap, as they typically do not pay enough state and local taxes to be affected.
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