Thanks to the Working Families Tax Cuts from the Trump administration, taxpayers from blue states with higher income and property taxes can deduct more of their state and local taxes from their federal taxable income. Of course, this applies to taxpayers across the board, but high-tax states benefit far more from this increased deduction.
The State and Local Tax (SALT) deduction cap increased from $10,000 for married couples to $40,000. This is a temporary increase, effective in 2025, with a 1% annual increase through 2029. The deduction is phased out for modified adjusted gross income over $500,000, decreasing by 30% of the amount of income over the threshold, to keep the benefit among middle and working classes. The cap will revert back to $10,000 in 2030.
While there are arguments for and against the SALT cap, there is no doubt that some taxpayers benefit more than others. For example, the standard deduction was also raised with the Working Families Tax Cuts to $31,500 for married couples. Under the higher SALT deductions, families would be better off itemizing their deductions in order to deduct the maximum amount from their taxable income. These deductions are expected to save taxpayers about $29 billion this year.
The biggest beneficiaries of this component of the tax cuts are in high-tax blue states. Californians, for example, pay a median of $4,831 in property taxes and up to 13.3% of income in state taxes. Despite opposing low tax burdens, California is among the top states that benefit from Trump’s low-tax policies. Not only are residents in states such as California, New York, and Maryland able to take advantage of higher SALT deductions, but they also benefit further from the other tax cuts, such as the Child Tax Credit, no tax on tips, and no tax on overtime pay.
Whether you oppose the increased SALT cap because it disproportionately benefits high earners and high tax states or you support the increase because it scales back the double taxation of income, everyone will benefit from a lower burden this tax season. For example, the average tax refund increased by 11.1% during the 2025 tax season, and the total amount refunded increased by 14.5%. And there are still more tax refunds to claim. According to the IRS, over 1.3 million people have unclaimed refunds for the 2022 tax year. This results in $1.2 billion in tax refunds, and if not claimed by Americans within three years, then it becomes property of the U.S. Treasury.
Bottom Line
The federal government keeps enough income from taxpayers. Increased deductions, tax credits, and lower tax burdens help Americans avoid overtaxation and keep more of their income. Pay close attention to all the changes you have learned about this tax season so you can be better prepared to lower your tax burden next year.