Californians will be able to deduct more of their state and local taxes on their federal income tax returns thanks to the Big Beautiful Bill President Donald Trump has signed into law.

The measure will allow taxpayers with incomes of less than $500,000 to deduct up to $40,000 in state and local taxes, or SALT, on their federal income tax returns. The break would be in effect for tax years 2025 through 2029, and the limits would go up 1% each year.

That’s a potentially huge change from the $10,000 cap established by the 2017 tax law.

“Real savings for groceries, kids, and homes,” tweeted Rep. Nick LaLota, R-New York, a big player in the effort to raise the cap.

While California lawmakers hailed the change, Democrats maintained that it’s part of legislation that on balance hurts people more than it helps.

Rep. Salud Carbajal, D-Santa Barbara, said of the SALT change, “A state like California certainly will benefit from that because the price of real estate is really expensive and many will be able to take advantage of that.”

But, he added, the legislation, which extends tax cuts enacted in 2017 and cuts funding for Medicaid and food aid programs significantly, is “a really bad bill.”

"Just think what House Republicans from California could do for Medicaid if they fought to save it as hard as their colleagues are fighting for the SALT tax caps,” tweeted House Speaker Emerita Nancy Pelosi, D-San Francisco.

Republicans fired back.

“This bill fulfills many of our promises to the American people: lower taxes, lighter regulations, a secure border, more frugal government and a war on waste,” said Rep. Tom McClintock, R-Elk Grove.

“Throughout history, these are the policies that have produced prosperity and security and there is every reason to believe they will again,” he said in a House floor speech Thursday.

Critics have argued for years that the increased cap largely benefits higher-income taxpayers.

“Even with an income phaseout for taxpayers earning over $500,000, the top 20% of taxpayers would be the only group to meaningfully benefit,” said an analysis by Garrett Watson, director of policy analysis at Washington’s Tax Foundation, a center-right research group.

California’s big tax burden

California this year has the fourth highest tax burden in the nation, according to a study by WalletHub, a financial services firm. The rankings take into account property, income and sales and excise taxes as a share of personal income in the state.

The Golden State’s tax burden trails only Hawaii, New York and Vermont. Alaska ranked last.

While California’s property and sales and excise taxes rank near the middle of the country, its individual income tax burden is second only to New York.

The impact on qualifying taxpayers in the Sacramento area and much of California would be significant, said a study by Nikhita Airi, research associate at the nonpartisan Tax Policy Center.

In 2017, eight counties in the nation had filers with average SALT deductions were more than $30,000. Four were in California: Marin, San Mateo, Santa Clara and San Francisco.

In Sacramento County about one-third of taxpayers deducted an average of $12,000 for the state and local taxes they paid before the 2017 law took effect.

With the $10,000 cap in place, and the standard deduction increased, those who got the state and local tax break dropped to 13% in 2022.

In El Dorado and Placer counties, 45% of taxpayers claimed an average of about $16,500 in SALT deductions before 2017. It also found that in Yolo County, about one-third of taxpayers got SALT deductions averaging $15,300 under the previous law.

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