US HB7561

Eliminates the $10,000 state and local tax (SALT) deduction cap for taxpayers with modified adjusted gross income below threshold amounts: $215,000 for joint filers, $161,250 for heads of household, and $107,500 for other filers.

Taxpayers exceeding these income thresholds receive $0 SALT deduction; the current $10,000 cap ($5,000 for married filing separately) remains for those below thresholds.

Creates a new deduction for qualified special assessment taxes paid on principal residences to fund local infrastructure projects including transportation, schools, hospitals, utilities, water systems, and dam restoration.

Special assessment taxes must be imposed by state or local governments within designated special assessment districts for community infrastructure owned by government entities or nonprofit member-owned utilities.

All provisions take effect for taxable years beginning after December 31, 2026, with threshold amounts adjusted annually for inflation starting in 2027.