How the Big Beautiful Bill Changes the Game
The Big Beautiful Bill increases the SALT deduction cap from $10,000 to $40,000, restoring much of the deduction power that was lost under the 2017 tax law. Here's what this means for New Jersey homeowners:
- Substantial Tax Relief: A higher cap means that homeowners can deduct more of what they’re already paying in property and state income taxes. This translates into lower taxable income and potentially thousands of dollars in tax savings annually.
- Middle-Class Boost: While critics have argued that SALT deductions mainly benefit the wealthy, the increased cap stands to benefit a broad range of middle- and upper-middle-class families in New Jersey who have been hit hard by the $10,000 limit.
- Increased Home Value Stability: With greater deductions available, homeownership becomes more affordable and attractive, potentially stabilizing or even boosting property values in high-tax communities.
- Greater Fairness: Proponents argue that the increased SALT cap makes the federal tax code fairer by preventing a double taxation scenario—where residents are taxed by both their state and the federal government on the same income without full deductibility.
🔍 Scenario: New Jersey Homeowner
- Married filing jointly
- Annual income: $300,000
- State income taxes paid: $15,000
- Property taxes paid: $25,000
- Total SALT paid: $15,000 (state) + $25,000 (property) = $40,000
📉 Under Previous Law: $10,000 SALT Deduction Cap
- The taxpayer can only deduct $10,000 of their $40,000 in state/local taxes from federal taxable income.
Taxable income:
$300,000 – $10,000 = $290,000
Assuming a marginal federal tax rate of 24%, the SALT deduction saves:
$10,000 × 24% = $2,400 in federal tax savings.
📈 Under Big Beautiful Bill: $40,000 SALT Deduction Cap
- Now the full $40,000 in state/local taxes can be deducted.
Taxable income:
$300,000 – $40,000 = $260,000
At the same 24% marginal rate:
$40,000 × 24% = $9,600 in federal tax savings.
💰 Tax Savings Difference:
$9,600 (new law) – $2,400 (old law) =
✅$7,200 more in tax savings for the year
✅ Bottom Line: With the Big Beautiful Bill becoming law, this New Jersey homeowner would save an extra $7,200 annually in federal taxes—just by being able to deduct the full $40,000 in SALT payments.
