H.R. 7561: Local Infrastructure Tax Cuts Act

H.R. 7561 does two things to the deduction for state and local taxes, known as SALT. It creates a new category of deductible local tax, and it tightens the limit on the whole deduction.

The new category is the special assessment. Cities, townships, and counties often pay for a specific project, such as a sewer extension, a repaved road, or a stormwater system, by charging only the properties it serves. Federal tax law has long treated those charges as an investment in your property rather than a tax, so they aren't deductible. Under H.R. 7561, a special assessment on your principal residence would count as a deductible state and local tax.

Qualifying projects include transportation, schools, hospitals, police and fire stations, water and sewer lines, electric, gas, and telecom utilities, and dam restoration. The project has to be owned by a state or local government, or by a not-for-profit, member-owned utility such as a rural electric co-op, and it has to directly benefit the property being charged.

The second change is to the cap. The 2025 tax law raised the SALT limit to $40,000, rising about 1% a year, and began phasing it down only above roughly $500,000 of income. This bill replaces that. Most filers would be limited to $10,000, and married people filing separately to $5,000. Special assessments would share that same cap with your property, income, and sales taxes.

Above an income threshold, the deduction disappears completely: $215,000 for married couples filing jointly, $161,250 for heads of household, and $107,500 for everyone else. There is no phase-out. A couple at $215,000 keeps up to $10,000; a couple at $215,001 keeps nothing.

All of these dollar figures would be adjusted for inflation starting in 2028. The changes would apply to tax years beginning in 2027.