New York, DC tops in savings
The typical New York homeowner affected by the higher SALT cap will save $7,092 annually, Redfin estimated. That led all states and trailed only the District of Columbia ($7,200).
California followed New York at $3,995 in median savings, with New Jersey ($3,897), Massachusetts ($3,835) and Connecticut ($3,133) rounding out the top five.
At the metro level, Nassau County, New York, led the nation with average annual savings of $7,200 — the maximum possible deduction. San Francisco ($6,843), San Jose ($6,661), New York City ($5,473) and Oakland ($5,455) also ranked high in the report.
Where savings are smallest
At the other end of the spectrum, South Dakota homeowners will save $1,033 a year, the lowest figure of any state. Alaska ($1,052), Nevada ($1,090), Tennessee ($1,097) and New Hampshire ($1,101) followed.
“For households in these states, the only real way to benefit is if their home is valuable enough for property taxes to exceed $10,000,” said Asad Khan, Redfin’s senior economist. “Even then, the savings are relatively small, since many of these owners are just barely over the old limit.”
Khan also noted that all five of the lowest-ranked states don’t have a state income tax, reducing the likelihood that homeowners would have exceeded the prior $10,000 cap.
Who benefits most
The share of homeowners likely to gain from the cap varies sharply by state.
In Massachusetts, 85.5% of households could benefit if they itemize deductions — the highest rate in the country. New Jersey (84.2%), Oregon (79.8%), New York (75.8%) and California (74.3%) followed.
Only 1% of Tennessee homeowners are expected to benefit, the lowest of any state.
Nevada (1.2%), Wyoming (2.2%), South Dakota (2.8%) and Alaska (3.3%) also had some of the smallest shares.
“West Virginia has the lowest median home value in the country, but nearly a third of homeowners there could benefit from the new cap,” Khan said. “Benefits vary so widely because the mix of home values, property taxes, and income taxes looks very different depending on where you live.”
Limited effect on home prices
“Homebuyers in states like Illinois, where the potential tax savings are high relative to home prices, may look at the new SALT cap as an opportunity to increase their homebuying budget,” Khan said. “Theoretically, that could lead to an increase in demand, and higher prices.”
But in expensive coastal metros, Khan said, the tax breaks are modest compared to home values.
Homeowners in Midwest cities like Cleveland, Indianapolis, Chicago and Pittsburgh are expected to see bigger returns relative to property prices, the report explained.