>It’s tax season, and thanks to last year’s GOP tax and spending law, there are lots of changes to the rules. One of the biggest involves the deduction for state and local taxes. So far this tax season, refunds have been trending higher.
>“We’re seeing that average tax refunds are upwards of about $3,600, or $350 higher than that same period last year,” said Rachel Snyderman, managing director of economic policy at the Bipartisan Policy Center.
>One reason for those bigger refunds? Changes to the state and local tax deduction, or SALT deduction. It used to be that taxpayers could only write off $10,000 of their state and local taxes when calculating their federal taxes. But the One Big Beautiful Bill Act boosted that to $40,000, with some limits.
>So, for folks who file this year, “about a quarter of the value of the tax cut that’s provided in 2025 will be just from that SALT cap increase,” said Garrett Watson, director of policy analysis at the Tax Foundation.
>“And of course, that 25% amount is going to be concentrated in folks who are itemizing, which by our estimate, is somewhere around, you know, 12% to 13% of filers,” Watson said.
>And those filers tend to have higher incomes. “The clients who are above $200,000 and between, I’d say, 200 to 400, that are itemizing,” said Tim Simons, the founder of Simonsgroup Tax Advisory in the DC area.
>Simons mainly works with higher-income clients and says many of them are getting bigger-than-usual refund checks thanks to the increased SALT deduction.
>“Probably about 15 to 20% of my clients are seeing a significant increase because of that,” he said.
>But those bigger refunds come at a cost: According to the Bipartisan Policy Center, their estimated budget impact is about $140 billion over the next decade.
Just_Candle_315 on
First you need to itemize so high income earners in states without an income tax may not qualify at all. Second, there’s a phase out for people who make more than $500k. If they make more than $600k, the SALT deduction is capped at the pre-2025 level of $10,000. This article doesn’t address that at all. Honestly, just seems like rage bait designed to generate clicks but lack basic information that completely dispels the initial premise.
Matt2_ASC on
Honestly, I think blue states should want a SALT deduction. This incentivizes states to own their own funded programs instead of going to the Federal government for funding. For the blue states that pay more to the Federal government than they receive, this is a good deduction to have. I even think it should be worked out so blue states can figure out how to withhold tax as a tax boycott of federal taxes.
TastySpermDispenser7 on
This misses the point.
I am well beyond capped for my SALT deduction. I should have to pay my fair share, and I have no issue with a higher tax bracket on my incremental income than my employees. The issue is that this is clearly a tax on democrats. Its exclusively blue states and blue cities within red states that are going to be higher COL.
I dont want to repeal the law though, I just want us all to agree that these are now the new rules. Democrats should pass laws that tax church donations at 100%. ICE at 70%. Talk radio? 50% tax on revenues. Confederate flag memorabilia? 1000%. Stop being so milquetoast and lets actually punch back.
Beginning-Wish-4273 on
Not really surprising. SALT deductions mostly benefit higher-income taxpayers in high-tax states, so increasing the cap just means larger refunds for the same group. It’s one of those policies that sounds broad but ends up being pretty targeted in practice.
Comfortable-Web9763 on
As a tax professional I can say this SALT increase is a good thing. The people upper middle class (making somewhere 250K to 400K) get fucked the absolute hardest tax wise. Not enough to leverage buy assets where almost all income is W2 with no deductions and phased out of practically everything. These people actually pay what most would consider to be a high amount. The problem is people making mid 7 figures and higher. They arent paying what they should be paying due to various strategies. I just did a return where the AGI was roughly 480K and the marginal rate between fed and state came to 43%. We can all agree thats a high enough marginal rate
6 Comments
>It’s tax season, and thanks to last year’s GOP tax and spending law, there are lots of changes to the rules. One of the biggest involves the deduction for state and local taxes. So far this tax season, refunds have been trending higher.
>“We’re seeing that average tax refunds are upwards of about $3,600, or $350 higher than that same period last year,” said Rachel Snyderman, managing director of economic policy at the Bipartisan Policy Center.
>One reason for those bigger refunds? Changes to the state and local tax deduction, or SALT deduction. It used to be that taxpayers could only write off $10,000 of their state and local taxes when calculating their federal taxes. But the One Big Beautiful Bill Act boosted that to $40,000, with some limits.
>So, for folks who file this year, “about a quarter of the value of the tax cut that’s provided in 2025 will be just from that SALT cap increase,” said Garrett Watson, director of policy analysis at the Tax Foundation.
>“And of course, that 25% amount is going to be concentrated in folks who are itemizing, which by our estimate, is somewhere around, you know, 12% to 13% of filers,” Watson said.
>And those filers tend to have higher incomes. “The clients who are above $200,000 and between, I’d say, 200 to 400, that are itemizing,” said Tim Simons, the founder of Simonsgroup Tax Advisory in the DC area.
>Simons mainly works with higher-income clients and says many of them are getting bigger-than-usual refund checks thanks to the increased SALT deduction.
>“Probably about 15 to 20% of my clients are seeing a significant increase because of that,” he said.
>But those bigger refunds come at a cost: According to the Bipartisan Policy Center, their estimated budget impact is about $140 billion over the next decade.
First you need to itemize so high income earners in states without an income tax may not qualify at all. Second, there’s a phase out for people who make more than $500k. If they make more than $600k, the SALT deduction is capped at the pre-2025 level of $10,000. This article doesn’t address that at all. Honestly, just seems like rage bait designed to generate clicks but lack basic information that completely dispels the initial premise.
Honestly, I think blue states should want a SALT deduction. This incentivizes states to own their own funded programs instead of going to the Federal government for funding. For the blue states that pay more to the Federal government than they receive, this is a good deduction to have. I even think it should be worked out so blue states can figure out how to withhold tax as a tax boycott of federal taxes.
This misses the point.
I am well beyond capped for my SALT deduction. I should have to pay my fair share, and I have no issue with a higher tax bracket on my incremental income than my employees. The issue is that this is clearly a tax on democrats. Its exclusively blue states and blue cities within red states that are going to be higher COL.
I dont want to repeal the law though, I just want us all to agree that these are now the new rules. Democrats should pass laws that tax church donations at 100%. ICE at 70%. Talk radio? 50% tax on revenues. Confederate flag memorabilia? 1000%. Stop being so milquetoast and lets actually punch back.
Not really surprising. SALT deductions mostly benefit higher-income taxpayers in high-tax states, so increasing the cap just means larger refunds for the same group. It’s one of those policies that sounds broad but ends up being pretty targeted in practice.
As a tax professional I can say this SALT increase is a good thing. The people upper middle class (making somewhere 250K to 400K) get fucked the absolute hardest tax wise. Not enough to leverage buy assets where almost all income is W2 with no deductions and phased out of practically everything. These people actually pay what most would consider to be a high amount. The problem is people making mid 7 figures and higher. They arent paying what they should be paying due to various strategies. I just did a return where the AGI was roughly 480K and the marginal rate between fed and state came to 43%. We can all agree thats a high enough marginal rate