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If you live in a state like California, New York, New Jersey, or even Connecticut or Illinois, you might finally get a nice break on your federal taxes starting this year.

Thanks to a new law called the One Big Beautiful Bill (signed in 2025), the old $10,000 limit on the State and Local Tax (SALT) deduction has been raised to $40,000 for most people.

This change applies to your 2025 taxes (the ones you’re filing right now in 2026) and will last through 2029. After that, it drops back to $10,000.

Here’s a simple, no-jargon explanation of what changed, why it matters, and who actually benefits.

First, What Is the SALT Deduction Anyway?

The SALT deduction lets you subtract certain state and local taxes you already paid from your federal taxable income. That lowers the amount of income the IRS taxes you on, which can mean a smaller tax bill or a bigger refund.

You can deduct:

• State and local income taxes (what you pay on your paycheck to your state)
• Property taxes (what you pay on your house or car)
• Sales taxes (in states that don’t have income tax, like Texas or Florida - you pick either income tax or sales tax, but not both)

It only counts if you itemize your deductions on your tax return (Schedule A). Most people just take the easy standard deduction instead because it’s simpler and often bigger.

How It Used to Work (and Why Most People Ignored It)

From 2018 through 2025, the Tax Cuts and Jobs Act put a hard $10,000 cap on SALT ($5,000 if you’re married filing separately). Before 2018, there was no cap - you could deduct everything.

That $10,000 limit hurt people in high-tax states a lot. In places like New York or California, it’s easy to pay $15,000-$30,000+ just in property taxes plus state income taxes. But you could only subtract $10,000 on your federal return.

On top of that, the standard deduction got much bigger in 2018 (and it keeps rising with inflation). For 2025 taxes it’s:

• $15,750 for single people
• $31,500 for married couples filing jointly

Because of the old $10,000 SALT cap, most families’ total itemized deductions (SALT + mortgage interest + charity + medical bills) didn’t beat the standard deduction. So they just took the standard one and moved on. The SALT rule basically became useless for millions of middle-class homeowners.

What Changed in 2026 (and How Long It Lasts)

The new law quadrupled the cap to $40,000 ($20,000 for married filing separately) starting with your 2025 tax return. It will go up a tiny bit each year (about 1%) through 2029:

• 2025: $40,000
• 2026: $40,400
• And so on, up to 2029

Then in 2030 it goes right back to the old $10,000 limit.

There’s one catch for very high earners: If your modified adjusted gross income is over $500,000 (single or joint), the extra deduction starts to shrink. Above about $600,000 it drops all the way back to $10,000. So this big new break is mainly for middle- and upper-middle-class families, not millionaires.

Why This Matters Now - Especially in Certain States

With a $40,000 cap, SALT alone can push your total itemized deductions way above the standard deduction ($15,750 single or $31,500 joint). Add in mortgage interest (if you have a home loan) or charitable donations, and itemizing suddenly makes sense for a lot more people.

This is huge in high-tax states where property taxes and state income taxes add up fast:

• California: Many homeowners pay $12,000-$20,000+ in property taxes alone, plus state income tax. Under the old rules you lost thousands of dollars in deductions. Now you can claim up to the full $40,000.
• New York: Similar story - high property taxes around New York City and suburbs plus state income tax often top $20,000-$30,000. Experts say the average homeowner there could save thousands more on federal taxes.
• New Jersey, Connecticut, Massachusetts, Illinois: Same pattern. Expensive homes mean big property tax bills, and these states have high income taxes too.

In low-tax states like Texas, Florida, or Tennessee (no state income tax), many people still won’t hit $40,000 in SALT, so the standard deduction might still be better. But if you own an expensive house or pay a lot in sales tax, it could help.

Real-life example: Say you’re married, live in New Jersey, own a home with $18,000 property taxes, and pay $15,000 in state income tax. That’s $33,000 in SALT. Under the old $10,000 cap you could only deduct $10,000. Now you deduct the full $33,000. If you also have $5,000 in mortgage interest, your total itemized deductions are $38,000 - way more than the $31,500 standard deduction. You save real money (roughly $1,500-$3,000 depending on your tax bracket).

Bottom Line

For the next four years (2025-2029 taxes), millions of homeowners in high-tax states have a real reason to itemize instead of taking the standard deduction. It could mean hundreds or even thousands of extra dollars back in your pocket.

Check your numbers this tax season - use tax software or talk to a tax preparer. Pull last year’s property tax bill and your state tax return. If your SALT plus other deductions tops the standard amount, you might want to itemize now while the bigger cap lasts.

This is one of those rare tax changes that actually helps regular working families in expensive parts of the country. Don’t miss it while it’s here!

The Trump Account is a new tax-advantaged savings vehicle designed to help build wealth for children from an early age. Below are the main eligibility rules, contribution limits, setup process, and withdrawal guidelines based on current law (as of tax year 2025–2026).

Eligibility Requirements

To establish a Trump Account for a child, the following must be met:

• The child must be a U.S. citizen with a valid Social Security number.
• The child must be under age 18 at the end of the calendar year in which the election to establish the account is made.
• Only one Trump Account is permitted per child.

Pilot Program Contribution

Children born between January 1, 2025, and December 31, 2028, are eligible for a one-time $1,000 contribution from the U.S. Treasury Department.

• This pilot contribution is deposited automatically upon election.
• It is invested in an index fund.
• It does not count toward annual contribution limits.

Children born outside this period but still under 18 may have an account established without the $1,000 seed funding.

Contribution Limits

• Annual contributions from individuals (parents, grandparents, friends, etc.) and employers are limited to $5,000 per year (post-tax dollars).
• Employer contributions are capped at $2,500 per year and count toward the $5,000 total.
• Employer contributions are excluded from the employee's taxable income.
• The annual limit will be adjusted for inflation starting in 2028.
• The government's $1,000 pilot contribution (where applicable) is separate and does not reduce the $5,000 limit.

How to Establish an Account

• File IRS Form 4547 (Trump Account Election) to make the election and, if eligible, request the pilot contribution.
• The form can be submitted with a federal tax return or electronically via IRS-approved systems.
• The program launched on July 5, 2026.
• Upon election, a designated financial institution will activate the account and receive funds.
• The parent or guardian serves as custodian until the child reaches age 18, at which point the account converts to standard traditional IRA rules under the child's control.

Withdrawals and Distributions

• Withdrawals are generally not permitted before age 18, except in limited circumstances (such as disability or other IRS-approved exceptions).
• After age 18, distributions follow traditional IRA rules and may be used for purposes such as:
  • Education expenses
  • First-home purchase
  • Business startup
  • Retirement

Always check the latest IRS guidance and Form 4547 instructions on IRS.gov, as rules and limits may be updated or clarified over time.

The One Big Beautiful Bill Act (OBBBA) introduced a new federal tax provision often referred to as "No Tax on Overtime". This is the main change related to overtime work.

It does not change overtime pay rules themselves (such as how overtime is calculated, eligibility under the Fair Labor Standards Act (FLSA), or requirements to pay time-and-a-half for hours over 40 in a workweek). Instead, it provides a temporary federal income tax deduction for a portion of qualified overtime pay.

Key Details on the New Overtime Provision

• Effective period: Applies to tax years 2025 through 2028
• What qualifies: Only the premium portion ("half" of "time-and-a-half") of overtime pay required under the federal FLSA (for hours worked over 40 in a workweek).
  • Example: If your regular rate is $20/hour, overtime rate is $30/hour → only the extra $10/hour (the premium) qualifies for the deduction. The full overtime pay is still reported as income, but you can deduct the premium part.
• Excludes: State-required overtime (e.g., daily overtime in some states), contractual overtime beyond FLSA requirements, voluntary overtime, or other bonuses.

Deduction Limits

• Up to $12,500 per year for single filers (or $25,000 for married filing jointly).
• Phases out for higher earners: Begins reducing above modified adjusted gross income (MAGI) of $150,000 (single) or $300,000 (joint), typically by $100 for every $1,000 over the threshold.

Who Can Claim It

• Non-exempt (hourly/FLSA-eligible) workers who receive qualified overtime.
• Available as an above-the-line deduction (even if you don't itemize).
• Requires a valid Social Security Number; married individuals generally must file jointly.

How It's Claimed

Employees deduct it on their federal tax return. Overtime remains subject to withholding, FICA (Social Security/Medicare), and is fully reported as income initially.

Changes for Employers and Reporting

• 2025: Transitional year — employers were not strictly required to separately report qualified overtime on Form W-2 (IRS provided relief from penalties), but they often needed to provide statements or calculations for employees to claim the deduction.
• 2026 and later: Employers must separately report qualified overtime compensation on Form W-2 (and certain 1099 forms), making it easier for workers to claim the deduction accurately. Payroll systems have been updating to track and distinguish the premium portion.

This provision aims to provide tax relief to hourly workers who put in extra hours, similar to the related "No Tax on Tips" deduction in the same bill.

For the most accurate personal advice, check IRS guidance (e.g., their FAQs or notices like Notice 2025-69) or consult a tax professional, as details can depend on individual circumstances.