Congress just passed its sweeping tax package, including a key provision raising the cap on the State and Local Tax (SALT) deduction to $40,000. That’s quadruple the previous $10,000 limit – and it could mean thousands of dollars in annual tax savings for owners in certain states and metros.
Here is commentary from Realtor.com Senior Economist Jake Krimmel on what this means:
“Increasing the SALT cap from $10,000 to $40,000 will have the greatest impact on homeowners in areas with highest state and local taxes, or those in the most expensive homes. An additional $30,000 in deductions could amount to about $10,500 in annual tax savings for such homeowners, assuming a 35% federal marginal tax rate.
While the deduction provides tax relief for higher-income homeowners, it may also affect certain local housing markets. 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. As demand for these neighborhoods rises, expect home prices to edge up there, too.”
A Realtor.com analysis pinpoints where the benefit is likely to be felt most — the states and metro areas with the highest share of homes taxed above $10,000 annually:
Top 10 States With Highest Share Of Properties Taxed Over $10,000
|
NJ |
39.9% |
|
NY |
25.9% |
|
CT |
19.4% |
|
CA |
19.3% |
|
MA |
18.4% |
|
NH |
16.3% |
|
DC |
15.6% |
|
IL |
13.7% |
|
TX |
12.4% |
|
RI |
9.3% |
Top 10 Metros With Highest Share Of Properties Taxed Over $10,000
|
San Jose-Sunnyvale-Santa Clara, CA |
47.9% |
|
New York-Newark-Jersey City, NY-NJ |
47.8% |
|
San Francisco-Oakland-Fremont, CA |
40.9% |
|
Bridgeport-Stamford-Danbury, CT |
39.3% |
|
Kiryas Joel-Poughkeepsie-Newburgh, NY |
37.5% |
|
Trenton-Princeton, NJ |
35.8% |
|
Nantucket, MA |
35.5% |
|
Austin-Round Rock-San Marcos, TX |
32.0% |
|
Jackson, WY-ID |
28.7% |
|
Santa Cruz-Watsonville, CA |
28.1% |
