One of the largest itemized deductions in the tax code is the State and Local Tax (SALT) deduction. It allows taxpayers to reduce their federally taxable income by the amount they pay in state and local taxes, including property and income or sales taxes (but not both income and sales taxes). The Tax Cuts and Jobs Act of 2017 (TCJA) introduced a first-ever cap ($10,000) on the total amount of state and local taxes taxpayers can deduct from their taxable income, while also nearly doubling the standard deduction. These changes were followed by a decline in the portion of tax returns claiming the SALT deduction and the average sizes of those deductions themselves.

The $10,000 SALT cap had been scheduled to be lifted at the end of 2025. The recently enacted One Big Beautiful Bill Act (OBBBA) instead retained a SALT deduction cap but increased it to $40,000 starting in 2025. OBBBA also scheduled the cap to increase by 1% each year until permanently reverting to $10,000 starting in 2030.