The bill amends the Internal Revenue Code to repeal the limitation on the deduction for certain taxes by striking paragraph (6) of section 164(b). In plain terms, it would eliminate the $10,000 cap on the aggregate deduction for state and local taxes (income, property, and certain sales taxes) and restore full deductibility for taxpayers who itemize.
That change primarily benefits taxpayers who claim itemized deductions—concentrated among higher‑income filers and residents of high‑tax states—and owners of property subject to large local taxes. Because the bill contains no offsets or revenue‑raising provisions, it will reduce federal receipts and reshape the tax subsidy for state and local taxation, with downstream effects on state fiscal choices and federal distributional outcomes.
At a Glance
What It Does
The bill strikes paragraph (6) of section 164(b) of the Internal Revenue Code, removing the statutory aggregate cap on state and local tax (SALT) deductions. The change applies to taxable years beginning after December 31, 2024.
Who It Affects
Directly affects individual taxpayers who itemize on Schedule A, particularly those paying large state income or property taxes (for example in NY, NJ, CA). It also touches pass‑through owners who pay state income taxes, state and local governments, and the Treasury/IRS administratively.
Why It Matters
It reverses a key component of the 2017 tax changes (the SALT cap), reallocating federal tax benefits back toward residents of high‑tax jurisdictions. That redistribution has immediate fiscal implications and could change incentives for state tax policy and taxpayer behavior.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
This bill makes a single, targeted change to the Internal Revenue Code: it removes the statutory paragraph that caps the aggregate deduction for certain state and local taxes. Under current law, individuals who itemize are limited in the total amount of state and local income, property, and certain sales taxes they can deduct; this bill restores the pre‑2018 treatment that allowed those taxes to be fully deductible when taxpayers itemize.
The operative language is narrow—strike one paragraph in section 164(b)—but its practical effect is broad for affected taxpayers.
Only taxpayers who itemize will see a change. The bill does not alter the standard deduction or the mechanics of Schedule A beyond removing the cap, so many taxpayers who take the standard deduction will not be affected.
The change disproportionately benefits filers with higher incomes and larger state or local tax bills—homeowners with high property taxes, high earners in high‑tax states, and owners of pass‑throughs whose state tax liabilities reduced their federal tax under prior rules.Implementation is straightforward in statutory drafting terms, but it has administrative consequences. The IRS will need to revert forms, guidance, and enforcement practices to allow full SALT deductions; for taxpayers it will affect taxable‑year 2025 returns (tax years beginning after December 31, 2024).
The repeal interacts with other parts of the code—most notably alternative minimum tax rules and limitations on miscellaneous itemized deductions—so taxpayers and preparers will need guidance on those cross‑effects.Finally, because the bill contains no offsets, it lowers federal revenue relative to current law. That fiscal impact creates secondary policy consequences: federal deficit implications, shifts in inter‑state redistribution of tax benefits, and an increased possibility that some states will face new incentives when setting tax and spending policies knowing their residents regain a federal deduction for additional state taxes.
The Five Things You Need to Know
The bill explicitly strikes paragraph (6) of IRC section 164(b), which is the statutory source of the aggregate SALT limitation.
The repeal applies to taxable years beginning after December 31, 2024, meaning the first affected returns will generally be filed for the 2025 tax year.
The change restores full deductibility of state and local income, property, and certain sales taxes for taxpayers who itemize on Schedule A; it does not change the standard deduction.
Pass‑through owners and taxpayers with large property tax bills regain federal tax relief that had been reduced by the cap, concentrating benefits among higher‑income filers and residents of high‑tax states.
The bill contains no revenue offsets or accompanying modifications to other code sections, so it will reduce federal receipts absent separate action to replace the lost revenue.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Short title: 'SALT Deductibility Act'
This section provides the act's short title — 'Securing Access to Lower Taxes by ensuring Deductibility Act' or the 'SALT Deductibility Act.' That label has no legal effect but signals the bill's intent to restore deductibility for state and local taxes.
Substantive change—repeal of SALT cap
Section 2(a) performs the operative statutory change: it amends IRC section 164(b) by striking paragraph (6). Paragraph (6) is the statutory text that created the aggregate $10,000 limit on deductions for state and local taxes after the 2017 tax act. By removing that paragraph, the code reverts to allowing full deductibility of otherwise qualifying state and local taxes for itemizers, subject to any non‑SALT limitations elsewhere in the code.
Effective date and scope of application
Section 2(b) states the amendment applies to taxable years beginning after December 31, 2024. Practically, taxpayers will see the effect on returns for tax year 2025 and later. The bill does not include grandfathering clauses, phase‑ins, or retroactive applicability to earlier years, nor does it attach revenue offsets or conforming amendments to related provisions (for example, it does not alter AMT language that can also limit deductions).
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- High‑tax‑state itemizing taxpayers (e.g., residents of New York, New Jersey, California): They regain the ability to deduct large state income and property tax bills in full, reducing their federal taxable income compared to current law.
- Homeowners with large property tax liabilities: Owners in jurisdictions with high property taxes will see larger itemized deductions, which can meaningfully reduce federal tax bills for those who itemize.
- Owners of pass‑through businesses taxed at the state level: State income taxes paid through pass‑through entities become deductible again for individual owners who itemize, restoring a prior federal relief channel.
- Tax preparers and tax software vendors: Restoring the deduction creates demand for updated guidance, forms, and software changes, benefitting preparers who advise affected clients and vendors who must implement rule changes.
- State and local governments (political/behavioral benefit): With federal deductibility restored, some state officials gain political room to defend or raise local taxes because constituents feel the federal offset reduces visible cost.
Who Bears the Cost
- Federal Treasury / All federal taxpayers: The repeal reduces federal receipts; absent offsets this increases deficits or requires spending cuts/tax increases elsewhere, effectively spreading the cost across all federal taxpayers.
- Taxpayers in low‑tax states: Residents of states with low state/local tax burdens get little or no benefit but effectively finance part of the federal tax cost through shared federal revenues.
- Non‑itemizing taxpayers (lower‑ and many middle‑income filers): Because the repeal only helps itemizers, taxpayers who take the standard deduction receive no direct benefit while bearing the indirect fiscal cost.
- IRS/Treasury (administrative burden): The agency must update forms, guidance, and enforcement procedures to implement full deductibility, incurring operational work and potential transitional confusion.
- Policymakers seeking revenue neutrality: Lawmakers who prioritize offsetting tax cuts face political and fiscal tradeoffs, since the bill increases pressure to identify revenues or cuts elsewhere.
Key Issues
The Core Tension
The bill resolves the political and tax‑planning problem of denying itemizers full relief for state and local taxes by restoring deductibility, but it does so at the expense of federal revenue and with an unequal distribution of benefits concentrated among higher‑income, high‑tax‑state residents—forcing a trade‑off between taxpayer relief and federal fiscal equity and neutrality.
The bill is narrowly drafted — strike one paragraph — but it creates broad redistributive and fiscal consequences. Restoring full SALT deductibility re‑targets federal tax relief toward itemizers, who are disproportionately higher income and concentrated in certain states.
That raises a classic equity question: is the federal tax code the right vehicle to subsidize higher state and local taxes? The statute itself offers no mechanism to mitigate concentrated benefits or to recoup lost revenue.
Implementation is not purely clerical. The IRS will need to revise instructions, potentially retool Schedule A and related worksheets, and provide guidance on interactions with the alternative minimum tax, state tax credits, and other limitations.
The bill does not address these interactions or provide conforming amendments; absent guidance, taxpayers and preparers could face inconsistent treatments in early filing seasons. Finally, the absence of offsets creates a material fiscal question: restoring full deductibility reduces federal revenue, which could prompt countervailing policy responses (spending cuts, tax increases elsewhere, or future statutory rescissions), and it creates an incentive structure for states that complicates longer‑term intergovernmental tax policy.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.