Which U.S. Households Benefit Most From the Increased SALT Deduction Cap?

A recent report from Redfin has highlighted the impact of the raised state and local tax (SALT) deduction cap, shedding light on how households across the U.S. will benefit from the change. Under the new rules, the SALT deduction cap will rise from $10,000 to $40,000 for 2025. This change, which was introduced through President Trump’s “One Big Beautiful Bill Act,” allows taxpayers to deduct up to $40,000 in property, sales, or income taxes already paid to state and local governments, making it particularly beneficial for homeowners in high-tax states.

For homeowners in certain regions, this increase in the SALT cap could provide significant savings. However, the extent of these savings and how many households stand to benefit varies significantly across the country.

New York Homeowners Lead the Way

According to Redfin’s analysis, New York leads the pack when it comes to savings. The typical New York homeowner impacted by the raised SALT cap can expect to save around $7,092 annually. This amount is the highest of any state, thanks to the combination of high state and local taxes and the state’s high property values. The savings are calculated by applying a 24% marginal tax rate to the amount that exceeds the previous $10,000 cap.

Other high-tax states, such as California, New Jersey, and Massachusetts, also see substantial savings from the increased SALT cap, with California homeowners saving an average of $3,995, New Jersey homeowners saving $3,897, and Massachusetts homeowners saving $3,835 annually. These savings are particularly valuable for high-income earners who have the option to itemize deductions.

Where Are the Lowest SALT Savings Found?

Not all states will benefit equally from the increased SALT cap. For example, South Dakota homeowners will see the smallest benefit, with typical savings of only $1,033 per year. This is because South Dakota, along with other states like Alaska, Nevada, and Tennessee, does not have a state income tax. As a result, homeowners in these states are less likely to reach the old $10,000 SALT deduction cap, making it harder for them to benefit from the increase.

Other states with low savings include Alaska ($1,052), Nevada ($1,090), and Tennessee ($1,097). In these states, homeowners would need to have particularly high property taxes to see any benefit from the increased SALT deduction, and even then, the savings are relatively small.

Who Benefits the Most?

Households in high-tax states with expensive homes will see the biggest benefits. In particular, Massachusetts stands out, with 85.5% of homeowners potentially benefiting from the new SALT rules, the highest share of any state. Other states with a high share of beneficiaries include New Jersey (84.2%), Oregon (79.8%), New York (75.8%), and California (74.3%). The common thread across these states is that they have high home values and high property taxes.

However, even in states with high median home values, some homeowners may not benefit as much. For instance, Washington has a high median home value but only 9.6% of homeowners are expected to benefit, due to the absence of a state income tax and relatively low property tax rates.

Metro Areas with the Highest SALT Savings

When zooming in on specific metro areas, Nassau County, New York tops the list with the largest savings. Homeowners in Nassau County could save $7,200 annually, the highest savings among the top 100 metro areas. This is due to the combination of high property taxes and the higher SALT deduction cap.

Other metros with significant savings include San Francisco ($6,843), San Jose ($6,661), and New York City ($5,473). Nearly 96.1% of homeowners in Nassau County stand to benefit from the increased SALT cap if they itemize their deductions, making it the highest share among the top 100 metro areas.

How This Affects Homebuyers

For homebuyers, the increased SALT cap could make a difference in budgeting. As taxes become a larger portion of housing expenses in states like New York and California, the ability to deduct up to $40,000 in state and local taxes could open up more opportunities for potential buyers. Redfin’s Senior Economist, Asad Khan, notes that for homebuyers in places like Illinois, where the potential tax savings are high relative to home prices, the SALT cap increase could allow for a higher home-buying budget. This could, in turn, lead to increased demand in these markets.

Conclusion

The increased SALT cap represents a significant opportunity for homeowners in high-tax states, particularly those with expensive homes. States like New York, California, and New Jersey are poised to see the most substantial benefits from the change, while states with lower property taxes or no state income tax will see more modest gains. For homebuyers, the impact of these changes may help provide more room in their budgets, especially in states where housing costs are already high. Ultimately, the new SALT cap could play a role in shaping both homeownership and the broader housing market landscape in 2025. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.