A bigger SALT deduction is leading to bigger tax refunds for higher-income taxpayers

It’s tax season, and thanks to last year’s GOP tax and spending law, there are lots of changes to the rules. One of the biggest involves the deduction for state and local taxes. So far this tax season, refunds have been trending higher.

“We're seeing that average tax refunds are upwards of about $3,600, or $350 higher than that same period last year,” said Rachel Snyderman, managing director of economic policy at the Bipartisan Policy Center.

One reason for those bigger refunds? Changes to the state and local tax deduction, or SALT deduction. It used to be that taxpayers could only write off $10,000 of their state and local taxes when calculating their federal taxes. But the One Big Beautiful Bill Act boosted that to $40,000, with some limits.

So, for folks who file this year, “about a quarter of the value of the tax cut that's provided in 2025 will be just from that SALT cap increase,” said Garrett Watson, director of policy analysis at the Tax Foundation.

“And of course, that 25% amount is going to be concentrated in folks who are itemizing, which by our estimate, is somewhere around, you know, 12% to 13% of filers,” Watson said.

And those filers tend to have higher incomes. “The clients who are above $200,000 and between, I'd say, 200 to 400, that are itemizing,” said Tim Simons, the founder of Simonsgroup Tax Advisory in the DC area.

Simons mainly works with higher-income clients and says many of them are getting bigger-than-usual refund checks thanks to the increased SALT deduction.

“Probably about 15 to 20% of my clients are seeing a significant increase because of that,” he said.

But those bigger refunds come at a cost: According to the Bipartisan Policy Center, their estimated budget impact is about $140 billion over the next decade.