 New SALT CapCould Slash Property Tax Pain for Homeowners in These High-Tax States |
Source |
American Shipper |
Post Date |
07/07/2025 |
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For millions of homeowners in high-tax states, propertytaxes haven? just been painful?hey?e been punishing.
As home values soared over the past decade, property tax bills roseright along with them. But a 2017 tax law placed ahard ceiling on how much homeowners could deduct from their federaltaxes?apping it at $10,000 for all state and local taxes combined, includingproperty taxes and income taxes.
Now, a dramatic change is in motion. Congress has approveda new $40,000 cap on state and local tax (SALT) deductions, and its headed tothe Presidents desk. If signed into law, it could bring long-awaited relief tohomeowners in high tax states.
And the impact could go far beyond April 15. This changemay shape where Americans choose to live, how long they stay in their homes,and whether some buyers reconsider states they? previously written off as tooexpensive.
What the SALT cap is?nd why it hurt so many homeowners
The original SALT deduction allowed taxpayers to deduct thefull amount of property taxes, along withstate and local income or sales taxes, from their federal tax return. Thatchanged with the 2017 Tax Cuts and Jobs Act, which capped the total deductionat $10,000.
In 2017, a property tax bill over $10,000 wasrare?omething only the wealthy had to worry about. But as home valuesappreciated rapidly during the COVID-19 pandemic, a growing number ofmiddle-class homeowners found themselves exposed, particularly those inhigh-cost areas.
In some parts of New Jersey and New York, over a third ofall households paid more than $10,000 in property taxes alone, meaning theywere effectively barred from deducting thousands of dollars in taxes they paidevery year.
What changes with the new $40,000 cap?
Originally, lawmakers floated a proposal that would haveraised the SALT cap to $30,000, which would have brought meaningful relief. Butif the $40,000 cap goes into effect, the shift could be seismic.
Take New Jersey, for example. Currently, 40% of homeownerspay more than $10,000 in property taxes alone. Under a $30,000 cap, that numberwould have fallen to 2.6%. And under a $40,000 cap, that number will plummet tojust 1.6%.
It? a similar story in New York (25.9% to 2.5%), California (20.2% to1.8%), and Connecticut (19.4% to1.8%). Even Texas?here property taxes are high due to thelack of a state income tax?ould see relief, with the share of over-caphomeowners ping from 13.4% to 1.2%.
"This legislative win underscores the standing homeowners hold in advocating for policy change," says ShannonMcGahn, utive vice president and chief advocacy officer at the NationalAssociation of Realtors?
"According to an NAR commissioned poll, 61% of voterssupport raising or lifting SALT caps, part of broader taxpayer support for real estate frilyreforms," she adds. "This reflects how homeowner voices increasinglyshape real solutions to affordability and inventory challenges."
It? critical to note that this isn? just just aboutproperty taxes. The SALT cap includes state and local income taxes, too?o evenrenters and homeowners with modest tax bills but high incomes could benefitunder the higher deduction ceiling.
States that will benefit themost:
These states saw the greatest share of homeowners who haveproperty tax bills over the proposed SALT cap :
1. New Jersey
2. New York
3. California
4. Connecticut
5. Massachusetts
6. New Hampshire
7. Illinois
8. District of Columbia
9. Texas
10. Washington
Cities that will benefit the most
These cities saw the greatest share of homeowners who haveproperty tax bills over the proposed SALT cap :
1. New York City, NY
2. San Jose, CA
3. San Francisco, CA
4. Bridgeport, CT
5. Poughkeepsie, NY
6. Trenton, NJ
7. Nantucket, MA
8. Austin, TX
9. Santa Cruz, CA
10. Boston, MA
Could this change how and where people buy?
Beyond tax season, the new SALT cap could influence realestate decisions in subtle but powerful ways.
?aising the SALT cap s a greater incentive to own inexpensive, high tax neighborhoods, such as affluent suburbs with high propertytaxes and good schools,?says Jake Krimmel, senior economistat Realtor.com??t could keep more homeowners in place?nd even draw back buyers whopreviously ruled out certain states or cities due to their tax implications.?
McGahn agrees. "NAR research shows that while overallinventory is up ~20% year-over-year, supply still lags in reachability formoderate and lower-income buyers," she says. "Enhanced taxrelief doesn? new homes, but it can help free up local financialbandwidth?nabling more homeowners to move and more buyers to qualify,marginally easing pressure in costly regions.
This could also play into broader housing affordabilityconversations, especially in cities where tax burdens have eroded the financialappeal of homeownership.
What comes next
The $40,000 cap has passed both the House and Senate, andis headed to the presidents desk. If enacted, it would take effect for thecurrent tax year, giving homeowners a break as soon as they file next spring.
The policy is not without debate. Critics still argue thatSALT benefits skew to wealthier taxpayers and could reduce federal revenue.Others say that for homeowners in high-tax areas, the cap never reflectedreality and that the expansion is long overdue.
The SALT deduction isn? just a line on a tax return; it?a powerful lever in the housing market. Raising the cap to $40,000 coulddeliver real financial relief to millions of homeowners, reshape affordabilityin high-tax states, and offer a new tool for families deciding where to putdown roots.
Perhaps more than anything, for homeowners whove feltignored, its proof that their voices are finally being heard. In McGahnswords, "This SALT cap expansion demonstrates that homeowner advocacy canyield tangible policy wins."
Millionaire renters surge in NYC ashigh earners opt for luxury leases:
The New York metro area experienced a drasticsurge in millionaires renting property there from 2019 to 2023, according toa report by the realestate listing site Rent Cafe.
Over this period of time, the number ofhouseholds in the area rented by those earning at least $1 million a year inincome more than doubled, rising 157%, from 2,204 in 2019 to 5,661 in 2023.This number blows all the other cities in the United States that were includedin the study, with the closest one being San Francisco, California, at just1,411 millionaire renter households.
Some of the main contributing factors to moremillionaires choosing to rent in the New York metro area are more flexibleleases, an abundance of luxury amenities, more location flexibility thanks to arise in people working remotely and fewer hassles and responsibilities thanwith owning a home. Additionally, robust gains in the stock market and theexpansion of the tech sector have contributed to more people becomingmillionaires.
In metro areas like New York, renting could up being a more cost-effective option for millionaires. There is a largerabundance of apartments for rent there than homes available to buy, with thelatter often having sky-high costs.
Rentership rates have recently entered historical highs,making them all the more attractive. One example of this tr is a 4-bedroom,3-bath penthouse in LongIsland City? Skyline Tower, which now rents for $11,500 permonth?he most expensive listing in Queens.
Across the United States as a whole,millionaire renter households spiked 204%, from 4,512 in 2019 to 13,692 in2023. This percentage change outpaced the 169% growth in homes owned bymillionaires, from 52,966 in 2019 to 143,320 in 2023.
Millennials account for the highestpercentage of millionaire renters in the United States among all generations,at 46%. Those from Gen X are second, at 34%, followed by Baby Boomers at 17%.The Silent Generation takes up another 2% and Gen Z 1%.
When it comes to homeowners, Gen X leads theway at 43%, followed by Baby Boomers at 32%. Millennials make up just 16% ofmillionaire homeowners. Bringing up the rear is the Silent Generation, at 5%.
From 2019 to 2023, high-earning Millennialshad a 60% boost in rentership. Such a tr reflects this generation?preference for flexibility and convenience.
Over the same period of time, more members ofGen X turned toward owning homes rather than renting, overtaking Baby Boomersfor the highest percentage of millionaire homeowners.
While there has been a no increase inmillionaires looking to rent a home rather than own one in the New York metroarea, there was still a drastic climb in those owning homes in the area.Households in the New York metro area with millionaire homeowners nearlydoubled from 2019 to 2023, with the number now sitting at 26,767.
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