Further SALT Cap Relief Only Benefits High Earners

Raising the current $10,000 cap on the State and Local Tax (SALT) deduction would primarily benefit high earners. Further increasing the cap above the House reconciliation bill proposal – a $30,000 cap for households making less than $400,000 – would almost exclusively benefit high earners.

Other analyses have shown that raising the SALT cap would primarily benefit the rich nationwide. We show that even in a high tax area, raising the cap above $30,000 and raising or removing the income limit would deliver nearly all the tax cuts to households making $400,000 or more, with the benefit rising with income. In Washington, DC, the deal announced by House leadership to raise the cap to $40,000 and to slowly phase it out above $500,000 in income would deliver a nearly $10,000 tax cut to our illustrative household making $500,000 and a $7,000 tax cut to a household making $600,000 relative to extending the $10,000 cap.

In our analysis, we model the tax benefit of a $10,000 universal SALT cap; a $30,000 cap that phases down to $10,000 above $400,000 of income; a $40,000 cap that phases down to $10,000 above $500,000 in income (similar to the latest compromise announced).¹

We model the potential benefits for an illustrative Washington, DC married couple with a mortgage making different income levels. Washington, DC has a higher income tax burden than most states, with the fourth highest top income tax rate and the third “least competitive” property tax system, per the Tax Foundation. A typical couple making up to $300,000 with a house in DC worth up to $1.5 million would receive no marginal benefit from a SALT cap higher than $30,000. Couples making $150,000 or less with homes valued up to $600,000 are unlikely to benefit from the SALT deduction at all and would instead take the standard deduction.

A couple making $200,000 with a $1 million home would see their taxes fall by nearly $2,000 with additional SALT relief – but all this benefit is from the previous House-proposed $30,000 cap. A further increase would have no impact, as these households are unlikely to pay more than $30,000 of local taxes. Also not benefitting are those making $300,000, who enjoy a $4,800 tax cut under the House bill but would not benefit from more relief.

Even in Washington, DC, further raising the SALT cap above $30,000 just provides benefits to couples making more than $300,000. A couple making $400,000 (with a $2 million home) would get a $2,400 tax cut under the newly-announced plan.

On the other hand, the wealthiest and highest income households receive a large benefit from the proposals to increase the SALT cap to $40,000. An upper-income couple making $500,000 per year with a $2.5 million home would receive a $9,600 tax cut. A couple making $600,000 with a $3,000,000 home would receive a $7,000 tax cut under the new deal. Even a couple making $750,000 with a $3.75 million home would receive $1,750 from this deal.

If the cap further weakens, a couple making $1 million per year with a $5 million home could expect to receive a tax break of nearly $30,000 under a SALT cap of $80,000, compared to $3,700 under the House proposal or current law.

In other words, further expanding the SALT cap to $40,000 could deliver nearly $10,000 in tax cuts on top of the initial House proposal for some of the richest households in Washington, DC (those making $500,000). Yet even those making $400,000 in such a high tax area would only receive a tax cut of $2,400. And households making $300,000 or below would likely receive no tax cut at all.

It would be a mistake to increase the SALT cap any further than the House already proposed last week in this bill. Limiting the SALT cap to a low level and including a sensible upper-income limit would limit revenue loss and maintain some progressivity, but it is still unwise as it would add to the bill’s deficit impact and worsen tax complexity, among other concerns. Lawmakers have many options to prevent changes in the SALT cap from adding to the national debt. 

1 For this analysis, we assume that the couple files jointly and has additional itemized deductions totaling 12 percent of their income (such as from charitable donations or the mortgage interest deduction). We also assume the passage of the House reconciliation bill, which raises the standard deduction and lowers tax rates and bracket thresholds in 2026.