SALT cap raised to $40,000 will benefit California homeowners, experts say

SAN FRANCISCO (KGO) -- The Big Beautiful Bill includes a bonus for some Californians in the form of a SALT tax deduction that the Senate voted to keep in the House's version of the bill.

ABC7 News spoke to a range of experts in real estate, economics and law to get their take on the impacts the bill could have in the Bay Area.

The Big Beautiful Bill, as it's called, will likely include a $40,000 SALT deduction - that is state and local tax deduction. Before 2017, it was unlimited. It then got capped at $10,000, and now, $40,000 will help a lot of Californians.

"In a place like the Bay Area, where you have a disproportionate number of people who are itemizers and who are earning a lot of money but aren't earning a lot a lot of money - so under 500K but over 100 or 200K - in order for them to not be taking a standard deduction, this amount of money could be substantial," said Darien Shanske, professor of law at UC Davis.

Thousands of dollars in the pockets of many homeowners and would be homebuyers because they'll be able to deduct more state taxes and property taxes on their federal tax return.

MORE: Polls show Americans largely oppose Trump's 'One Big Beautiful Bill'

"There's a lot of layers in the cake that go into financing a home purchase or even homeownership, and making a change that makes one of those layers a little easier to digest - it could be a gamechanger both for current homeowners and for individuals considering home ownership," said David Stark with the Bay East Association of Realtors.

"People in California are going to be among the major beneficiaries in the U.S. both because there are a lot of us in California, there are a lot of affluent people in California and we have high taxes in California," said Alan Auerbach, professor of Economics at UC Berkeley. "It might mean that some people who are otherwise just on the margin between leaving California and staying - it might push them a little bit toward staying."

But other components of the Big Beautiful Bill could potentially wipe out the benefit.

"On the other hand, the amount of money in this tax break given to a handful of affluent but not super affluent people, is going to pale in comparison to the Medicaid cuts," said Shanske. "This bill will be overwhelmingly negative for California.

But raising the SALT deduction to $40,000 for those who qualify, will benefit those taxpayers on their 2025 returns.