Introduction
Trump’s 2025 tax proposal introduces nationwide reforms but not all taxpayers will feel the effects equally. Where you live plays a critical role in how much you benefit (or don’t) from changes to federal income tax brackets, SALT deduction limits, child tax credits, and business incentives.
This blog breaks down how the 2025 tax bill impacts different states, with a focus on high-tax vs. low-tax states, itemized deductions, and real-life income scenarios.
Federal Provisions That Vary by State (IRC References)
- IRC §164(b)(6) – SALT deduction cap increase to $20,000 (joint filers)
- IRC §1 – Uniform federal rate cuts, but impact varies based on state income levels
- IRC §24 – Child Tax Credit increase benefits low- and middle-income families across all states
- IRC §199A – QBI deduction helps small businesses regardless of state
States That Benefit Most
These high-tax states see greater benefit due to the increased SALT deduction cap and broader itemization potential:
- California
- New York
- New Jersey
- Illinois
- Connecticut
- Massachusetts
Example: A couple in New Jersey paying $18,000 in property and state income tax
- Pre-2025 SALT deduction limited to $10,000
- 2025 proposal allows $20,000 → $10,000 more in deductions
- With a 24% marginal tax rate, that’s $2,400 in tax savings
States with Neutral or Minimal Impact
These low- or no-income tax states see fewer SALT deduction changes, but still benefit from broader rate cuts and credits:
- Texas
- Florida
- Nevada
- Washington
- Tennessee
- South Dakota
Example: A family in Texas earning $120,000
- No state income tax = no SALT benefit
- Still benefits from:
- Lower income tax brackets
- Increased child tax credit
- Potential QBI deduction
States with Potential Mixed Outcomes
Some states could see limited benefit or increased federal tax exposure due to:
- Low property taxes = no itemization advantage
- No dependents = no additional credits
- Income phaseouts for high earners
These include:
- Indiana
- Arizona
- North Carolina
- Oregon
- Wisconsin
Step-by-Step Tax Planning by State
- Check Your State Tax Rate – Use IRS and state tax comparison tools
- Review Your Property Tax Bill – If over $10,000, you may now benefit from itemizing
- Determine Standard vs. Itemized – Especially in states with high SALT
- Adjust Withholding – File an updated W-4 if you’re in a lower-bracket state
- Consult a CPA – Customized state impact analysis is essential for multi-state earners
Conclusion
Trump’s 2025 tax reform affects taxpayers differently across the country. If you live in a high-tax state, you may finally recapture lost deductions. If you live in a no-tax state, you’ll still benefit but differently. Understanding the intersection of federal and state tax is crucial for real savings.
Call to Action
Do you know how Trump’s tax bill impacts your state-specific taxes?
Many taxpayers miss opportunities by failing to align their federal and state planning. Whether you live in a high-tax or low-tax state, a strategic plan can ensure you benefit as much as possible.
Book a meeting with Anshul Goyal, CPA, EA, FCA
About Our CPA
Anshul Goyal, CPA, EA, FCA, is a U.S.-licensed Certified Public Accountant and Enrolled Agent with extensive experience handling federal and state tax strategy. He assists individual and business taxpayers with multi-state returns, residency audits, and SALT compliance.
Disclaimer
This article is for informational purposes only and is not tax or legal advice. Tax law and state conformity vary. Always consult with a CPA for your personal tax situation.