Hike in SALT Deduction to Benefit Some Illinois Homeowners

Some Illinois taxpayers could see savings next year due to a higher federal cap on state and local tax, or SALT deductions, one of the most contentious elements of the U.S. tax code.

As part of President Donald Trump’s recently enacted tax and spending package, the SALT deduction cap will rise from $10,000 to $40,000 for the 2025 tax year. The increase could offer significant federal tax relief in high-property-tax states like Illinois, which was among the hardest hit when the cap was first imposed in 2017.

Tax experts said the change will push more households to itemize their deductions, Crain’s reported, particularly couples earning $150,000 or more who own property and carry a mortgage.

“People blow through that $10,000 cap very quickly,” said lawyer David Hughes of Kilpatrick Townsend & Stockton.

The cap applies only to individuals making under $500,000 annually. But state data shows 1.4 million Illinois filers make between $100,000 and $500,000, prime candidates to benefit. In some ZIP codes, including Glencoe, more than half of taxpayers were impacted by the previous cap.

The change also raises questions about Illinois’ SALT workaround for pass-through entities, which has allowed owners of S corps and partnerships to deduct state taxes at the entity level, a move that’s not subject to the federal cap. That workaround has saved Illinois taxpayers an estimated $500 million per year since its creation but is set to expire at the end of this year unless extended by state lawmakers.

A bill to keep the workaround in place was introduced, but didn’t get a hearing. Gov. J.B. Pritzker hasn’t said whether he supports extending it but welcomed the federal cap increase, saying, “It never should have been put in place to begin with.”

If nothing changes, advisors expect renewed interest in prepaying property taxes before year-end to maximize the $40,000 deduction.

— Judah Duke