Key Takeaways
• House passed bill raising SALT deduction cap from $10,000 to $40,000 starting in 2025.
• Higher SALT cap benefits dual-income H-1B families in high-tax states like California and New York.
• Deduction phases out for incomes above $250,000 single or $500,000 joint filers.
As of July 3, 2025, the United States 🇺🇸 House of Representatives has passed the One Big Beautiful Bill Act (H.R. 1), a sweeping legislative package that includes major changes to federal tax rules. One of the most talked-about provisions is the increase in the State and Local Tax (SALT) deduction cap, which has direct and important effects on dual-income families, especially those on H-1B visas. The bill is now awaiting debate and possible changes in the Senate, where opinions on the SALT deduction remain divided.
What does this mean for dual-income H-1B families? In short, if the bill becomes law in its current form, many H-1B households could see a lower federal tax bill starting in 2025. However, the benefits are not the same for everyone, and there are important details and limits to keep in mind. Let’s break down what’s happening, why it matters, and how it could affect H-1B families living and working in the United States 🇺🇸.
What Is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act is a large legislative proposal that covers many areas, but one of its main features is a change to the SALT deduction cap. The SALT deduction lets taxpayers subtract certain state and local taxes—like income, sales, and property taxes—from their federal taxable income. This deduction is especially important for people living in states with high taxes, such as California, New York, and New Jersey.
Since 2018, the SALT deduction has been capped at $10,000 per year for both single and married taxpayers. Many families, including those on H-1B visas, have found this cap to be a financial burden, especially if both spouses work and earn good incomes.
What’s Changing with the SALT Deduction Cap?
The House version of the One Big Beautiful Bill Act proposes to raise the SALT deduction cap from $10,000 to $40,000 starting in 2025. This is a big jump and could mean thousands of dollars in extra deductions for families who pay high state and local taxes.
But there are some important rules:
- The new $40,000 cap applies starting in 2025.
- For tax years 2026 through 2033, the cap will increase by 1% each year.
- After 2033, the cap will stay at the 2033 level.
- The deduction is phased out for higher-income taxpayers: If your modified adjusted gross income (MAGI) is over $250,000 (single filers) or $500,000 (joint filers), you will lose some or all of the deduction.
Example:
If you and your spouse are both on H-1B visas, live in a high-tax state, and together pay $30,000 in state and local taxes, you could only deduct $10,000 under the old rule. With the new cap, you could deduct the full $30,000—unless your income is above the phase-out limit.
Why Does This Matter for H-1B Families?
Many H-1B visa holders work in high-paying jobs in technology, finance, healthcare, and other fields. They often live in states with high taxes and high costs of living. When both spouses work, their combined income can be significant, and their state and local tax bills can be much higher than the old $10,000 cap.
Key reasons this change matters:
- Bigger deduction means lower federal taxes: Raising the cap allows families to subtract more of their state and local taxes, which lowers their taxable income and, in turn, their federal tax bill.
- Helps with high cost of living: In places like California and New York, where many H-1B families live, state and local taxes can be a big part of the household budget.
- Supports dual-income households: The change especially helps families where both spouses work and earn good salaries.
How Does the Phase-Out Work?
The new SALT deduction cap is not available to everyone. There is a phase-out for higher-income taxpayers:
- Single filers: If your MAGI is over $250,000, the deduction starts to go away.
- Married filing jointly: If your MAGI is over $500,000, the deduction starts to go away.
This means that some dual-income H-1B families, especially those with very high combined salaries, may not get the full benefit of the higher cap.
How the phase-out works:
- If your income is just above the limit, you may lose part of the deduction.
- If your income is much higher, you may lose the deduction entirely.
This rule is designed to target the benefit to middle and upper-middle-class families, not the very highest earners.
What Happens After 2025?
The bill includes a plan for the SALT cap to grow over time:
- From 2026 to 2033: The cap increases by 1% each year.
- After 2033: The cap stays at the 2033 level.
This gradual increase means that as state and local taxes go up, the deduction cap will also rise, giving families a bit more room each year.
Senate Disagreement: What’s Next?
While the House has passed the One Big Beautiful Bill Act with the higher SALT deduction cap, the Senate has not agreed to this change yet. Some Senators argue that raising the cap mostly helps wealthier families in high-tax states, while others say it is needed to make the tax system fairer for people who pay a lot in state and local taxes.
What does this mean for H-1B families?
- The final version of the bill could change: The Senate may lower the cap, add more limits, or even remove the change altogether.
- Uncertainty remains: Until the Senate acts and the President signs the bill, nothing is final.
For the latest updates, you can check the official U.S. Congress website.
Practical Implications for Dual-Income H-1B Families
Let’s look at how these changes could affect real families:
1. Increased Deduction
Dual-income H-1B families could see a much larger deduction for state and local taxes. This is especially true in states where taxes are high and both spouses work.
Example:
A couple on H-1B visas living in New Jersey pays $25,000 in state and local taxes. Under the old rule, they could only deduct $10,000. Under the new rule, they could deduct the full $25,000, saving them money on their federal taxes.
2. Income Phase-Out
Not all families will benefit equally. If your combined income is above $500,000, you may lose some or all of the deduction.
Example:
A dual-income H-1B couple in California earns $520,000 together. Because their income is above the phase-out limit, they may not get the full deduction.
3. Future Adjustments
The cap will go up by 1% each year from 2026 to 2033. This means the deduction will keep pace with rising taxes, helping families as their incomes and tax bills grow.
Who Benefits Most?
- Middle and upper-middle-class families in high-tax states: These families are most likely to see a real benefit from the higher cap.
- Dual-income H-1B households: Because both spouses often work and pay high taxes, these families stand to gain the most—unless their income is above the phase-out limit.
- Taxpayers in states like California, New York, New Jersey, Massachusetts, and Illinois: These are the states where state and local taxes are highest.
What Do Experts Say?
Tax professionals generally welcome the higher SALT cap, saying it gives relief to families who have been hit hard by the $10,000 limit. They point out that many families in high-tax states have been paying much more in state and local taxes than they could deduct.
Policy analysts note that the phase-out for higher incomes is important. It means the benefit is focused on families who are not at the very top of the income scale, but who still face high tax bills.
As reported by VisaVerge.com, the debate over the SALT deduction cap is likely to continue, with both sides making strong arguments about fairness and who should benefit from tax breaks.
What Should H-1B Families Do Now?
1. Stay Informed:
The bill is not law yet. Watch for updates from the Senate and the President.
2. Check Your Income:
If your combined income is below $500,000, you are more likely to benefit from the higher cap.
3. Plan Ahead:
If you expect your income or tax situation to change, talk to a tax professional. They can help you understand how the new rules might affect you.
4. Keep Good Records:
Make sure you keep records of your state and local tax payments. You will need these to claim the deduction.
5. Use Official Resources:
For the latest information, visit the U.S. Congress website or the IRS SALT deduction page for updates.
Background: H-1B Visa Holders and Taxes
H-1B visas are for skilled workers in specialty jobs, such as technology, engineering, and healthcare. Many H-1B families live in states with high taxes and high costs of living. They pay the same federal, state, and local taxes as U.S. citizens and permanent residents.
Why does the SALT deduction matter for H-1B families?
- High incomes, high taxes: Many H-1B families have two earners and pay a lot in state and local taxes.
- No special tax breaks: H-1B visa holders do not get special tax treatment—they pay the same as everyone else.
- Every deduction counts: With high living costs, any extra deduction can make a big difference.
What If the Senate Changes the Bill?
If the Senate changes the SALT deduction cap or other parts of the bill, the House and Senate will need to agree on a final version. This could mean:
- A lower cap than $40,000
- A different phase-out limit
- Other changes to who can claim the deduction
Until the bill is signed into law, nothing is certain.
Key Takeaways for Dual-Income H-1B Families
- The One Big Beautiful Bill Act could raise the SALT deduction cap from $10,000 to $40,000 starting in 2025.
- Dual-income H-1B families in high-tax states could see big tax savings, unless their income is above the phase-out limit.
- The cap will increase by 1% each year from 2026 to 2033, then stay at that level.
- The Senate has not agreed to the House’s plan, so the final rules could change.
- Stay informed, keep good records, and talk to a tax professional to make the most of any new deduction.
Where to Find More Information
For official updates on the One Big Beautiful Bill Act and the SALT deduction cap, visit the U.S. Congress website. For questions about your personal tax situation, consult a qualified tax professional.
In summary: The One Big Beautiful Bill Act’s proposed increase in the SALT deduction cap could bring real relief to many dual-income H-1B families, but the final outcome depends on what happens in the Senate. Keep an eye on the news, check your income level, and be ready to adjust your tax planning if the law changes.
Learn Today
One Big Beautiful Bill Act → A legislative package proposing major changes including increasing the SALT deduction cap starting in 2025.
SALT Deduction Cap → The maximum amount taxpayers can deduct for state and local taxes on their federal return.
H-1B Visa → A U.S. visa allowing skilled foreign workers to work temporarily in specialty occupations.
Modified Adjusted Gross Income (MAGI) → An income measure used to determine eligibility for tax benefits like the SALT deduction.
Phase-Out → A gradual reduction of tax benefits as the taxpayer’s income exceeds certain thresholds.
This Article in a Nutshell
The One Big Beautiful Bill Act proposes raising the SALT deduction cap, offering H-1B families in high-tax states significant federal tax relief starting in 2025, with gradual increases through 2033. Income limits apply, and Senate approval remains uncertain, making it vital for families to monitor changes and plan tax strategies ahead.
— By VisaVerge.com
