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Senate Considers Scaling Back $40,000 SALT Deduction Cap as House Republicans Threaten to Block Tax Bill

Moderate Republicans warn that trimming the negotiated relief will doom final approval of President Trump’s tax package.

The Internal Revenue Service (IRS) headquarters building in Washington.
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Overview

  • The House-approved reconciliation bill would raise the SALT deduction cap to $40,000 for joint filers and $20,000 for separate filers, phase it out for incomes above $500,000 and index the limit through 2033.
  • Senate Majority Leader John Thune signaled that Republicans may reduce the $40,000 cap to generate revenue and offset the package’s cost.
  • Moderate House Republicans from New York, New Jersey and California have vowed to oppose the final bill if the Senate alters the SALT provision.
  • The measure would make the qualified business income deduction permanent at 23% beginning in 2026 and end state-level SALT workarounds for specified service pass-through businesses.
  • The Congressional Budget Office estimates the package would add $2.4 trillion to the deficit and cut federal revenue by $3.6 trillion over the next decade, raising concerns about its fiscal impact.