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Explainer

Republicans Have a SALT Tax Deal. Who Will Benefit?

President Donald Trump and US House Speaker Mike Johnson at the US Capitol on May 21.Source: Bloomberg

For as long as Americans have paid federal income taxes, they’ve been able to subtract some of what they pay to their state and local governments from their taxable income. This federal deduction for state and local taxes — the SALT deduction, for short — has a big influence on how the tax burden is divided. It tends to help taxpayers in wealthier, more urban states, where sales taxes are higher and real estate costs more.

President Donald Trump’s first-term tax law, approved in 2017, capped the SALT deduction at $10,000 — the first across-the-board cap on the deduction in its history. In the years since, removing or raising the cap has become an important cause for lawmakers representing districts in high-tax states.