Some homeowners could get a fat deduction under the new GOP tax bill. Here’s what to know.

The recent passage of the One Big Beautiful Bill Act by the House could potentially lead to significant tax breaks for U.S. homeowners. One of the key provisions of this legislation is the lifting of the tax deduction cap for state and local taxes (SALT) from $10,000 to $40,000. This change is aimed at providing tax savings for homeowners with high property taxes or substantial state income tax liabilities.

The SALT deduction cap was initially introduced in 2017 as part of the Tax Cuts and Jobs Act, with the intention of offsetting the tax breaks included in that legislation. Prior to this law, there was no limit on the amount of state and local taxes that taxpayers could deduct from their federal income taxes. However, critics argued that the unlimited SALT deduction primarily benefited upper-income homeowners in states with high taxes like New York and California.

With the surge in real estate values in recent years, more homeowners across the country have been facing higher property taxes and reaching the $10,000 SALT deduction limit. This has prompted calls for changes to the cap, leading to the negotiation for a higher limit in the One Big Beautiful Bill Act.

The House bill proposes to raise the SALT deduction cap to $40,000, with the new threshold set to take effect for the 2025 tax year. This increase is expected to benefit homeowners, especially those living in areas with higher property taxes and higher-income taxpayers. The full $40,000 deduction would be available to filers with household incomes below $500,000, with a phaseout for those earning above that amount.

While the higher SALT cap could provide relief for many homeowners, it comes at a cost to the federal government in terms of tax revenue. The increase to $40,000 is projected to result in a loss of nearly $334 billion in tax revenue over the next decade, according to analysis from the Penn Wharton Budget Model. This adds to concerns about the overall cost of the budget package and its impact on the U.S. debt.

As the bill moves to the Senate, where some Republicans have expressed opposition to certain aspects of the legislation, further changes may be made before it reaches President Trump’s desk. The potential impact of the higher SALT deduction cap remains a topic of debate among policymakers and experts, highlighting the complex nature of tax policy and its implications for homeowners and the economy.