Key Takeaways
• Senate raises SALT deduction cap to $40,000 in 2025, increasing through 2029, reverting to $10,000 in 2030.
• Jointly filing H-1B couples in high-tax states like California benefit from major federal tax savings.
• No phaseout below $10,000 cap; phaseouts start at $500,000 income; pass-through entity limits removed.
As of July 3, 2025, the Senate has passed a version of the One Big Beautiful Bill Act that brings major changes to the State and Local Tax (SALT) deduction cap. This development is especially important for H-1B couples who file their taxes jointly in the United States 🇺🇸. The new rules could mean thousands of dollars in tax savings for many immigrant families, especially those living in high-tax states like California, New Jersey, and New York.
Let’s break down what these changes mean, how they might affect jointly filing H-1B couples, and what steps you can take to make the most of the new rules.
What Happened: The Senate’s Move on the SALT Deduction Cap
The Senate’s version of the One Big Beautiful Bill Act raises the SALT deduction cap to $40,000 for 2025. This cap will increase slightly to $40,400 in 2026, and then go up by 1% each year from 2027 to 2029. However, in 2030, the cap will drop back down to $10,000.
Who is affected?
– Taxpayers who itemize deductions on their federal tax returns
– People living in states with high property taxes and state income taxes
– Jointly filing H-1B couples, especially those with higher incomes or expensive homes
Why does it matter?
The SALT deduction lets you subtract state and local taxes you’ve paid from your taxable income on your federal return. When the cap is low, you can only deduct a small amount, which means you might pay more in federal taxes. Raising the cap allows you to deduct more, which can lower your tax bill.
How the New SALT Cap Works for Jointly Filing H-1B Couples
Increased Deduction Means Bigger Tax Savings
Jointly filing H-1B couples can now deduct up to $40,000 in state and local taxes in 2025. This is a big jump from the previous $10,000 cap. For couples living in places like California or New York, where property taxes and state income taxes are high, this change can mean thousands of dollars in savings.
Example:
Let’s say an H-1B couple in New Jersey pays $25,000 in property taxes and $18,000 in state income taxes. Under the old $10,000 cap, they could only deduct $10,000. With the new $40,000 cap, they can now deduct the full $40,000, lowering their taxable income by $30,000 more than before.
Who Gets the Full Benefit?
Not everyone will get the full deduction. The Senate’s bill phases out the deduction for high earners:
– In 2025, the deduction starts to phase out at $500,000 of income for joint filers.
– In 2026, the phaseout begins at $505,000.
– From 2027 to 2029, the threshold increases by 1% each year.
If your income is below these amounts, you can take the full deduction. If you earn more, the deduction gets smaller and eventually disappears.
No Income-Based Phaseouts Below $10,000
Unlike the House version of the bill, the Senate’s version does not include income-based phaseouts for the deduction below $10,000. This means that most middle-income and upper-middle-income H-1B couples will see the full benefit of the higher cap, as long as their income is under the phaseout threshold.
What About Pass-Through Entities?
A pass-through entity is a business where the income “passes through” to the owners, who then report it on their personal tax returns. Examples include partnerships and S corporations.
The Senate’s version of the One Big Beautiful Bill Act does not limit the SALT deduction for pass-through entities. This is different from earlier drafts and the House version, which had more restrictions. For H-1B holders who own or invest in these types of businesses, this means they can still deduct state and local taxes paid through their business without facing new limits.
Why This Matters for H-1B Couples
High-Tax States See the Biggest Impact
States like California, New Jersey, and New York have some of the highest property and income taxes in the country. Many H-1B visa holders live and work in these states, especially in tech, finance, and healthcare. The higher SALT cap means these families can keep more of their earnings instead of sending it to the federal government.
Homeowners Get Relief
Owning a home in a high-tax state often means paying large property taxes. The new cap allows more of these taxes to be deducted, making homeownership more affordable for H-1B couples.
Tax Planning Becomes More Important
With the new rules, H-1B couples should review their tax strategies. They may need to decide whether to itemize deductions (list out all deductions, including SALT) or take the standard deduction (a set amount everyone can claim). If their total deductions, including the higher SALT cap, are more than the standard deduction, itemizing could save them money.
Key Details: What’s in the Senate Bill?
- SALT deduction cap: $40,000 in 2025, $40,400 in 2026, then 1% increases through 2029, back to $10,000 in 2030
- Phaseout for high incomes: Starts at $500,000 in 2025, $505,000 in 2026, and increases by 1% each year
- No phaseout below $10,000: Most middle-income families keep the full deduction
- No new limits for pass-through entities: Business owners can still deduct state and local taxes
What’s Next? The Bill Isn’t Final Yet
The One Big Beautiful Bill Act is still moving through Congress. The Senate and House have passed different versions, and they need to agree on a final version before it becomes law. The House version includes some stricter rules, especially for pass-through entities and certain service professionals, which could affect some H-1B holders.
What should you do?
– Stay informed: Watch for news about the final bill.
– Talk to a tax advisor: They can help you plan for different outcomes.
– Check official sources: The IRS website has updates on tax laws and deduction limits.
Expert Opinions: What Are People Saying?
Tax experts and professors say the higher SALT cap is a big help for people in high-tax states. Professor Darien Shanske of UC Davis explains that the increase is especially helpful for those earning between $100,000 and $500,000. These families often pay high state and property taxes, and the new cap lets them deduct more, lowering their federal tax bills.
On the other hand, some experts warn that the benefit is smaller for people in lower-tax states or for those who don’t itemize deductions. Also, if your income is above the phaseout threshold, you may not see much benefit.
What Should Jointly Filing H-1B Couples Do Now?
1. Monitor Legislative Updates
The bill isn’t law yet. Congress could still make changes, especially as they work to combine the Senate and House versions. Keep an eye on trusted news sources and official government updates.
2. Consult a Tax Advisor
Tax laws can be complicated, and everyone’s situation is different. A tax advisor can help you figure out:
– Whether you should itemize deductions or take the standard deduction
– How the new SALT cap affects your federal tax bill
– If you’re close to the phaseout threshold, how to plan your income and deductions
3. Review Your Tax Planning Strategies
With the higher SALT cap, it might make sense to change how you handle deductions. For example:
– If you own a home, make sure you’re tracking property tax payments
– If you have a pass-through business, talk to your accountant about how the new rules affect you
– If you’re close to the income phaseout, see if there are ways to lower your taxable income (like contributing more to retirement accounts)
Special Considerations for H-1B Couples
Immigration Status and Tax Filing
H-1B visa holders are allowed to file taxes jointly if they are married and both spouses are considered “resident aliens” for tax purposes. This usually means they have lived in the United States 🇺🇸 for most of the year. Filing jointly often results in a lower tax bill than filing separately.
Important:
If one spouse is not a resident alien, special rules apply. You may need to file separately or make an election to treat both spouses as residents for tax purposes. The IRS provides guidance on this, and you can find more details on their official page for H-1B tax filing.
Impact on Green Card Applicants
For H-1B couples planning to apply for a green card, tax returns are often part of the application process. Showing consistent, accurate tax filings can help your case. The higher SALT deduction cap could make it easier to afford living in high-tax states while you wait for your green card.
Comparing the Senate and House Versions
The Senate’s version of the One Big Beautiful Bill Act is more generous for most taxpayers, especially H-1B couples:
– No income-based phaseouts below $10,000
– No new limits for pass-through entities
The House version is stricter, with more limits for business owners and certain professionals. If the House’s rules end up in the final bill, some H-1B holders who work in fields like consulting, law, or medicine (and who use pass-through entities) could lose some of the benefits.
What If the Cap Drops Back to $10,000 in 2030?
The higher SALT cap is temporary. In 2030, it will go back to $10,000 unless Congress acts again. This means H-1B couples should plan for possible changes in their tax bills in the future.
Tips:
– Don’t rely on the higher cap lasting forever
– Make long-term plans with the possibility of a lower cap in mind
– Stay flexible with your tax and financial planning
Resources for Staying Informed
- IRS SALT Deduction Information: IRS SALT Deduction
- Senate Budget Committee: Updates on the bill’s progress
- House Ways and Means Committee: Details on tax legislation
- VisaVerge.com: As reported by VisaVerge.com, these changes could have a major impact on immigrant families, especially those on H-1B visas, by making it easier to afford living in high-tax states.
Action Steps for H-1B Couples
- Track the Bill: Follow news from Congress and the IRS for updates on the One Big Beautiful Bill Act and the SALT deduction cap.
- Meet with a Tax Professional: Get advice tailored to your situation, especially if you own a home, run a business, or are close to the income phaseout.
- Prepare for Changes: Keep good records of your state and local tax payments, and be ready to adjust your tax strategy if the rules change.
- Think Long-Term: Remember that the higher cap is temporary. Plan for what happens if it drops back to $10,000 in 2030.
Conclusion
The Senate’s move to raise the SALT deduction cap under the One Big Beautiful Bill Act is a big deal for jointly filing H-1B couples, especially those living in high-tax states. The higher cap means more money in your pocket, but only if you meet the income requirements and itemize your deductions. With the bill still in progress, it’s important to stay informed, talk to a tax advisor, and plan for both the short-term benefits and the long-term changes.
By understanding these new rules and taking smart steps now, H-1B couples can make the most of the opportunities the One Big Beautiful Bill Act provides—while being ready for whatever comes next.
Learn Today
SALT deduction cap → The maximum state and local tax amount deductible from federal taxable income.
H-1B couples → Married foreign professionals on H-1B visas filing joint U.S. tax returns.
Phaseout → Gradual reduction or elimination of tax benefits based on income thresholds.
Pass-through entities → Businesses where income passes to owners, reported on personal tax returns.
Itemize deductions → Listing individual deductible expenses on a tax return instead of taking standard deduction.
This Article in a Nutshell
The Senate’s One Big Beautiful Bill Act raises the SALT deduction cap to $40,000 in 2025, benefiting H-1B couples. This change helps families in high-tax states save thousands on federal taxes by increasing allowable deductions, though phaseouts apply for incomes above $500,000. The bill still awaits final approval.
— By VisaVerge.com
