House Speaker Johnson says agreement reached on $40,000 state and local tax deduction cap

House Speaker Johnson says agreement reached on $40,000 state and local tax deduction cap

WASHINGTON — House Speaker Mike Johnson (R-La.) announced an agreement on the State and Local Tax (SALT) deduction cap, setting it at $40,000. This cap is an increase from the current $30,000 limit proposed in the Republican fiscal bill and a significant jump from the $10,000 limit under the 2017 tax law [1].

The agreement comes as Republicans from high-tax states and House GOP leaders are nearing a consensus on the SALT deduction. This cap will allow residents in states like New York, New Jersey, and California to deduct the cost of their state income taxes, property taxes, and other local taxes from their federal returns [2].

Johnson emphasized that any increase in the SALT deduction must be balanced with lower federal spending on Medicaid due to the imposition of work requirements. The speaker hinted that the final language for the deduction limit could be increased before the scheduled House Budget Committee vote on the full bill this Friday [2].

The cap, if passed, would help residents in high-tax states who have long advocated for a higher SALT deduction. However, fiscal hawks within the Republican Party, such as House Freedom Caucus Chairman Andy Harris (R-Md.) and Rep. Chip Roy (R-Texas), have pushed for $2 trillion in spending cuts or savings and have opposed the legislative package [2].

The House Ways and Means Committee released legislative text Monday capping SALT deductions at $30,000 for individuals making under $400,000 annually and at $15,000 for married individuals filing separately and having $200,000 in yearly income [2].

The agreement comes as Republicans are pushing for a final vote on the package next week. Johnson expressed hope that the bill could pass by a simple majority in both chambers of Congress through a process known as budget reconciliation [2].

References:
[1] https://www.wsj.com/politics/policy/lawmakers-close-in-on-higher-salt-cap-835b2f29
[2] https://nypost.com/2025/05/15/us-news/speaker-johnson-says-everything-is-on-the-table-as-blue-state-gopers-push-salt-deduction-cap-boost/