President Trump last week signed the One Big Beautiful Bill Act, which includes a higher SALT cap that will temporarily increase the State and Local Tax deduction to $40,000 for many taxpayers. The change is expected to benefit California homeowners facing high property and income taxes.
Higher SALT Cap for Five Years
Under the new law, households earning under $500,000 annually can deduct up to $40,000 in state and local taxes. This higher SALT cap, set to expire after five years, more than quadruples the previous $10,000 limit. California Representative Young Kim, working with the National Association of REALTORS® and the California Association of REALTORS®, played a major role in advancing the measure through the House.
While the bill originally aimed to make the increase permanent, lawmakers compromised on the five-year term. After that, the cap will automatically revert to $10,000. Supporters of the higher SALT cap say it offers much-needed relief to homeowners in regions with high property values and income tax rates.
Impact on California Homeowners
According to the California Association of REALTORS®, the higher SALT cap could improve housing affordability and support property values. In Los Angeles County, Orange County, and the Bay Area, many taxpayers have struggled to deduct their full tax payments under the prior limit.
“The expanded deduction will bring relief to working families who have borne the brunt of high living costs,” said C.A.R. President Jennifer Branchini. “This is a step toward fairer treatment of taxpayers in California and other high-cost states.”
Homeowners should note that the benefit will be time-limited. Tax analysts recommend consulting a qualified tax professional to understand the details and ensure compliance. The IRS plans to issue guidance later this year on eligibility and filing instructions.
For more information about the higher SALT cap and how it could affect your return, visit the IRS website or review updates from the California Association of REALTORS®.
Potential for Future Reforms
Lawmakers from both parties have stated they will pursue a permanent increase to the deduction cap. Representative Kim and other members of Congress representing high-tax states have signaled their intention to introduce legislation that would extend the higher threshold beyond five years.
Community Relevance
For residents across the San Gabriel Valley and throughout California, the higher SALT cap offers potential tax relief during a period of high housing costs. Local homeowners may be able to keep more of their income and plan more effectively for the next five years.
