Fresh outrage has erupted after President Donald Trump signed a sweeping tax overhaul that significantly increases the State and Local Tax (SALT) deduction cap to $40,000, a move MAGA say disproportionately benefits taxpayers in Democratic-leaning states.
Trump signed the One Big Beautiful Bill Act into law on July 4, 2025. The legislation changed several parts of the federal tax code for the 2025 tax year, including a major increase in the cap on the state and local tax, or SALT, deduction.
Under the old rules, taxpayers who itemized could deduct up to $10,000 in combined state and local property taxes and income taxes. The new law raised that limit to $40,000 for 2025.
The cap is set to increase by 1 percent each year through 2029 before dropping back to $10,000 in 2030. The higher limit phases down for individuals with income above $500,000.
The change has led to larger refunds and lower tax bills for many people in states with high taxes and high property values. Those states include California, New York, New Jersey, Connecticut and Maryland. Most of these states did not support Trump in the 2024 election.
The Internal Revenue Service began accepting 2026 tax returns on January 26. As of early March 2026, the average refund stood at $3,676, up from $3,324 at the same point in the previous year, according to IRS data.
That is an increase of 10.6 percent. The agency has already issued more than $160 billion in refunds for 2025 returns.
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Data from some financial institutions showed bigger gains in certain high-tax states. In California, average refunds among members of Navy Federal Credit Union rose 21 percent compared with 2025.
In Maryland the increase was 12 percent, and in Virginia it was 13 percent. By comparison, refunds in Florida rose 6 percent and in Texas 5 percent. Florida and Texas have no state income tax.
Homeowners in high-tax areas can now write off more of their property taxes and state income taxes when they file. For example, a married couple filing jointly with $250,000 in income and a 22 percent marginal tax rate could deduct an extra $15,000 or more in state and local taxes. That would reduce their federal tax bill by about $3,300.
Doris Christelis, a 62-year-old retiree in Sudbury, Massachusetts, said she and her husband can now deduct nearly $24,000 in property taxes. “I felt like it was a gift for having to put up with Trump,” she told The Wall Street Journal.
The law also expanded the standard deduction and added new breaks for tip income, overtime pay and certain senior deductions.
However, the IRS did not change withholding tables during 2025 to match the new rules. As a result, many workers had more tax taken out of their paychecks than they owed. That overpayment returns as larger refunds when they file.
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The SALT change has drawn criticism from some Trump supporters who say it gives the biggest benefits to voters in Democratic-leaning states.
Why this matters
The higher SALT cap directly reduces the federal tax burden on households that pay large amounts in state and local taxes. Many of those households live in states that voted against Trump.
At the same time, residents in low-tax states such as Florida and Texas see smaller gains because they pay less in state taxes to begin with.
The result is a shift in who receives the largest immediate benefits from the tax law. Refunds represent money that was already withheld from paychecks and sent to the IRS.
The new rules mean some taxpayers get more of that money back while others get less of an increase.
The temporary nature of the $40,000 cap means the benefits will shrink after 2029 unless Congress acts again.
