For millions of homeowners in high-tax states, property taxes haven’t just been painful—they’ve been punishing.
As home values soared over the past decade, property tax bills rose right along with them. But a 2017 tax law placed a hard ceiling on how much homeowners could deduct from their federal taxes—capping it at $10,000 for all state and local taxes combined, including property taxes and income taxes.
Now, a dramatic change is in motion. Congress has approved a new $40,000 cap on state and local tax (SALT) deductions, and it’s headed to the President’s desk. If signed into law, it could bring long-awaited relief to homeowners in high tax states.
And the impact could go far beyond April 15. This change may shape where Americans choose to live, how long they stay in their homes, and whether some buyers reconsider states they’d previously written off as too expensive.
What the SALT cap is—and why it hurt so many homeowners
The original SALT deduction allowed taxpayers to deduct the full amount of property taxes, along with state and local income or sales taxes, from their federal tax return. That changed with the 2017 Tax Cuts and Jobs Act, which capped the total deduction at $10,000.
In 2017, a property tax bill over $10,000 was rare—something only the wealthy had to worry about. But as home values appreciated rapidly during the COVID-19 pandemic, a growing number of middle-class homeowners found themselves exposed, particularly those in high-cost areas.
In some parts of New Jersey and New York, over a third of all households paid more than $10,000 in property taxes alone, meaning they were effectively barred from deducting thousands of dollars in taxes they paid every year.
What changes with the new $40,000 cap?
Originally, lawmakers floated a proposal that would have raised the SALT cap to $30,000, which would have brought meaningful relief. But if the $40,000 cap goes into effect, the shift could be seismic.
Take New Jersey, for example. Currently, 40% of homeowners pay more than $10,000 in property taxes alone. Under a $30,000 cap, that number would have fallen to 2.6%. And under a $40,000 cap, that number will plummet to just 1.6%.
It’s a similar story in New York (25.9% to 2.5%), California (20.2% to 1.8%), and Connecticut (19.4% to 1.8%). Even Texas—where property taxes are high due to the lack of a state income tax—would see relief, with the share of over-cap homeowners dropping from 13.4% to 1.2%.
“This legislative win underscores the standing homeowners hold in advocating for policy change,” says Shannon McGahn, executive vice president and chief advocacy officer at the National Association of Realtors®.
“According to an NAR‑commissioned poll, 61% of voters support raising or lifting SALT caps, part of broader taxpayer support for real‑estate‑friendly reforms,” she adds. “This reflects how homeowner voices increasingly shape real solutions to affordability and inventory challenges.”
It’s critical to note that this isn’t just just about property taxes. The SALT cap includes state and local income taxes, too—so even renters and homeowners with modest tax bills but high incomes could benefit under the higher deduction ceiling.
States that will benefit the most:
These states saw the greatest share of homeowners who have property tax bills over the proposed SALT cap drop:
1. New Jersey
- Share of homeowners with property tax bills over $10K: 40%
- Share of homeowners with property tax bills over $30K: 2.6%
- Share of homeowners with property tax bills over $40K: 1.6%
2. New York
- Share of homeowners with property tax bills over $10K: 25.9%
- Share of homeowners with property tax bills over $30K: 3.6%
- Share of homeowners with property tax bills over $40K: 2.5%
3. California
- Share of homeowners with property tax bills over $10K: 20.2%
- Share of homeowners with property tax bills over $30K: 2.9%
- Share of homeowners with property tax bills over $40K: 1.8%
4. Connecticut
- Share of homeowners with property tax bills over $10K: 19.4%
- Share of homeowners with property tax bills over $30K: 2.1%
- Share of homeowners with property tax bills over $40K: 1.8%
5. Massachusetts
- Share of homeowners with property tax bills over $10K: 18.4%
- Share of homeowners with property tax bills over $30K: 1.7%
- Share of homeowners with property tax bills over $40K: 1.0%
6. New Hampshire
- Share of homeowners with property tax bills over $10K: 16.3%
- Share of homeowners with property tax bills over $30K: 1.2%
- Share of homeowners with property tax bills over $40K: 0.8%
7. Illinois
- Share of homeowners with property tax bills over $10K: 14.7%
- Share of homeowners with property tax bills over $30K: 1.7%
- Share of homeowners with property tax bills over $40K: 1.1%
8. District of Columbia
- Share of homeowners with property tax bills over $10K: 15.6%
- Share of homeowners with property tax bills over $30K: 3.4%
- Share of homeowners with property tax bills over $40K: 2.5%
9. Texas
- Share of homeowners with property tax bills over $10K: 13.4%
- Share of homeowners with property tax bills over $30K: 1.8%
- Share of homeowners with property tax bills over $40K: 1.2%
10. Washington
- Share of homeowners with property tax bills over $10K: 9.4%
- Share of homeowners with property tax bills over $30K: 1.1%
- Share of homeowners with property tax bills over $40K: 0.8%
Cities that will benefit the most
These cities saw the greatest share of homeowners who have property tax bills over the proposed SALT cap drop:
1. New York City, NY
- Share of homeowners with property tax bills over $10k: 47.8%
- Share of homeowners with property tax bills over 30K: 5.4%
- Share of homeowners with property tax bills over40K: 3.5%
2. San Jose, CA
- Share of homeowners with property tax bills over $10K: 47.9%
- Share of homeowners with property tax bills over $30K: 6.8%
- Share of homeowners with property tax bills over$ 40K: 3.8%
3. San Francisco, CA
- Share of homeowners with property tax bills over $10K: 40.9%
- Share of homeowners with property tax bills over $30K: 5.2%
- Share of homeowners with property tax bills over $40K: 3.0%
4. Bridgeport, CT
- Share of homeowners with property tax bills over $10K: 39.3%
- Share of homeowners with property tax bills over $30K: 4.6%
- Share of homeowners with property tax bills over $40K: 2.6%
5. Poughkeepsie, NY
- Share of homeowners with property tax bills over $10K: 37.5%
- Share of homeowners with property tax bills over $30K: 2.4%
- Share of homeowners with property tax bills over $40K: 1.5%
6. Trenton, NJ
- Share of homeowners with property tax bills over $10K: 35.8%
- Share of homeowners with property tax bills over $30K: 3.0%
- Share of homeowners with property tax bills over $40K: 1.8%
7. Nantucket, MA
- Share of homeowners with property tax bills over $10K: 35.5%
- Share of homeowners with property tax bills over $30: 5.4%
- Share of homeowners with property tax bills over $40K: 2.9%
8. Austin, TX
- Share of homeowners with property tax bills over $10K: 32.0%
- Share of homeowners with property tax bills over $30K: 3.6%
- Share of homeowners with property tax bills over $40K: 2.4%
9. Santa Cruz, CA
- Share of homeowners with property tax bills over $10K: 28.1%
- Share of homeowners with property tax bills over $30K: 2.1%
- Share of homeowners with property tax bills over $40K: 1.1%
10. Boston, MA
- Share of homeowners with property tax bills over $10K: 25.8%
- Share of homeowners with property tax bills over $30K: 2.2%
- Share of homeowners with property tax bills over $40K: 1.4%
Could this change how and where people buy?
Beyond tax season, the new SALT cap could influence real estate decisions in subtle but powerful ways.
“Raising the SALT cap creates a greater incentive to own in expensive, high tax neighborhoods, such as affluent suburbs with high property taxes and good schools,” says Jake Krimmel, senior economist at Realtor.com. “It could keep more homeowners in place—and even draw back buyers who previously ruled out certain states or cities due to their tax implications.”
McGahn agrees. “NAR research shows that while overall inventory is up ~20% year-over-year, supply still lags in reachability for moderate and lower-income buyers,” she says. “Enhanced tax relief doesn’t create new homes, but it can help free up local financial bandwidth—enabling more homeowners to move and more buyers to qualify, marginally easing pressure in costly regions.
This could also play into broader housing affordability conversations, especially in cities where tax burdens have eroded the financial appeal of homeownership.
What comes next
The $40,000 cap has passed both the House and Senate, and is headed to the president’s desk. If enacted, it would take effect for the current tax year, giving homeowners a break as soon as they file next spring.
The policy is not without debate. Critics still argue that SALT benefits skew to wealthier taxpayers and could reduce federal revenue. Others say that for homeowners in high-tax areas, the cap never reflected reality and that the expansion is long overdue.
The SALT deduction isn’t just a line on a tax return; it’s a powerful lever in the housing market. Raising the cap to $40,000 could deliver real financial relief to millions of homeowners, reshape affordability in high-tax states, and offer a new tool for families deciding where to put down roots.
Perhaps more than anything, for homeowners who’ve felt ignored, it’s proof that their voices are finally being heard. In McGahn’s words, “This SALT cap expansion demonstrates that homeowner advocacy can yield tangible policy wins.”
