Quick Take:
This year, some Santa Cruz homeowners were able to save thousands of dollars when filing taxes. That's due to an increased cap on state and local tax deduction referred to as SALT.
Lauren Leff was excited to file her taxes this year. The reason? She is among Santa Cruz homeowners saving thousands of dollars thanks to a tax code change.
“This was the first year I can remember where I didn’t owe taxes,” said Leff, a retired public school teacher living in Aptos. She saved more than $10,000 and even got a small refund for the 2025 tax season.
She said the difference this year was the increased cap on state and local tax deduction, known as SALT. For 2025 through 2029, the cap has risen from $10,000 to $40,000, which filers try to reach by combining their property and state income taxes.
The deduction is available for filers whose itemizations, including SALT and mortgage interest, exceed the standard deduction. Filers also must make less than $500,000 a year or $600,000 if married.
And if you’ve already filed but didn’t know about the SALT cap, you have three years to file an amended return.
High property taxes are why thousands of Santa Cruz homeowners can benefit from SALT deductions. Some 36% of single-family homes in Santa Cruz County had property taxes above $10,000 a year in 2025, according to figures provided to Lookout by property-data firm ATTOM.
Leff, who pays about $14,000 in property taxes a year on a home she bought in 2007, said she was able to benefit from nearly the entire cap. She is also taxed on her pension income.
“When it was capped at $10,000, it made barely a dent,” Leff said. “That just used to be ruinous for me.”
The SALT deduction first got capped at $10,000 in 2017’s Tax Cuts and Jobs Act. Republicans said the cap would offset broader tax cuts, but critics said it took aim at Democrat-leaning communities, which are more likely to have higher state and property taxes.
Before the 2024 election, President Donald Trump pledged to boost the SALT deduction: “I will turn it around, get SALT back, lower your taxes, and so much more,” he said in September. The One, Big, Beautiful Bill Act, which Trump signed in 2025, largely extended the 2017 tax cuts, but also made changes including raising the SALT cap.
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“Everybody had been talking about this big beautiful bill and everybody was saying horrible things about it,” Leff said, “and I’m saying, ‘Yes, but have you heard about this SALT thing.’”
Leff said she doesn’t support Trump or credit him with improving her tax situation. It is a sentiment shared with other homeowners in Santa Cruz County, where Trump won about 21% of the vote in the 2024 election.
“Among my clients, many of them are paying less taxes this year due to the $40,000 SALT increase,” said Patricia Beckwith, a Soquel-based certified public accountant. “However, no one, including myself, wants to give any credit to Donald Trump.”
How SALT helps newer Santa Cruz homeowners
Santa Cruz filers reaping tens of thousands of dollars in deductions through SALT tend to have more recently-purchased homes and make more than $200,000 a year, but often much higher, said Allison Duffy, a Capitola-based certified public accountant. Nearly 25% of Santa Cruz residents made more than $200,000 annually in 2024, up from nearly 17% when the SALT cap started in 2018, according to the U.S. Census.
“Now people are seeing these huge refunds of $10,000 to $20,000,” Duffy said, pointing to how payrolls were often overwithheld in 2025 because the updated tax law wasn’t in force until later that year.
Rising property taxes and incomes in Santa Cruz County mean homeowners will increasingly benefit from SALT deductions. There are already more Santa Cruz homeowners who can save through the deduction than when the cap was put in place.
When the $10,000 SALT cap was in effect, the county’s median incomes rose to $107,893 in 2024 from $86,941 in 2018, according to the U.S. Census. And average property taxes rose to $8,380 from $6,099, according to ATTOM.
“As long as income levels and property values remain elevated in Santa Cruz County, SALT deductions will likely continue to be a meaningful planning factor for higher-income households,” Duffy said.
For filers whose incomes vary, she said they should consider deferring property tax payments if they expect to make more than $500,000, which can avoid losing the deduction from the income phaseout. If their income will be lower, they may want to prepay their property taxes.
“You can kind of shift where that deduction is going to hit for you,” Duffy said. “A lot of clients are still over that $40,000 because their property taxes are $20,000 and then they pay $50,000 in state income taxes, so they are still losing deductions, it’s just that they are not losing as much.”
What is the future of SALT?
The SALT deduction has been in the tax code since 1913, but in recent years has become a political flashpoint because of its bigger role in tax returns.
The updated $40,000 cap is expected to cost the federal government about $320 billion in tax revenue compared with the previous cap, according to Tax Foundation, a Washington D.C.-based research group. The cap will increase 1% a year, starting at $40,400 in 2026.
“We’ve seen in both parties attempts to try to figure out the right balance here,” said Garrett Watson, director of policy analysis at Tax Foundation. “It’s not really a partisan issue.”
Another debate on SALT is expected in 2029 or 2030, when the SALT cap reverts to $10,000, and tax cuts are revisited under the next administration. Ideally, the cap will be pegged to inflation like other parts of the tax code, Watson said.
For Leff’s part, she hopes a higher SALT deduction is here to stay.
“It’s given me a lot of breathing room,” she said. “My hope is that they don’t reduce it.”
