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House Bill 7561HR 7561

Local Infrastructure Tax Cuts Act

Taxation

7 pages

house
senate
president

Introduced February 12, 2026 by Haley Stevens · Last progress February 12, 2026

Bill Summary

Summary

Changes how much state and local tax (SALT) individuals can deduct on their federal returns by setting tiered caps based on filing status and income, and creates a new federal deduction for certain local special-assessment taxes paid for projects that directly benefit a homeowner's principal residence. Both changes apply to tax years beginning after December 31, 2026, and income thresholds are indexed for inflation beginning after 2027. Under the bill, high‑income filers above a defined threshold would lose the SALT deduction entirely, married taxpayers filing separately are limited to a $5,000 SALT deduction, and other filers are limited to $10,000. The new special-assessment deduction lets taxpayers deduct qualified local assessments used to fund projects (for example, transportation, utilities, schools, hospitals, emergency services, and dam restoration) when tied to their principal residence.

Key Points

Tiered SALT deduction caps set for tax years starting after Dec. 31, 2026: $0 for high-income filers above a threshold, $5,000 for married filing separately, $10,000 for other filers.
Creates a new federal deduction for qualified special-assessment taxes that fund local projects directly benefiting a taxpayer's principal residence.
Qualified projects for the special-assessment deduction include transportation, utilities, schools, hospitals, emergency services, and dam restoration.
Income thresholds that trigger the $0 SALT cap are adjusted annually for inflation beginning after 2027.
Both the SALT cap changes and the special-assessment deduction take effect for tax years beginning after Dec. 31, 2026.
The special-assessment deduction is limited to assessments tied to a taxpayer's principal residence and does not apply to general local taxes or assessments for non-residential property.
The bill changes tax liabilities for homeowners and other taxpayers and will require IRS guidance and additional recordkeeping for qualifying assessments.
Potential net federal revenue impact is uncertain: SALT cap tightening reduces deductions for some, while the new assessment deduction lowers taxable income for qualifying homeowners.

Pros & Cons

The bill preserves limited SALT relief for many lower- and middle-income filers and creates a targeted deduction for homeowners' special assessments, but it tightens SALT benefits for higher-earning and certain filers, shifts more federal tax burden onto residents of high-tax areas, and adds new fr(

Potential Benefits

7

Many middle- and lower-income taxpayers (AGI below thresholds) can still deduct up to $10,000 of state and local taxes, preserving some tax relief.
Homeowners of principal residences can deduct qualifying special-assessment taxes for infrastructure that directly benefits their home, lowering taxable income.
The special-assessment deduction reduces the after-tax cost of local infrastructure projects and can encourage investment in roads, water, emergency services, and utility improvements.

Potential Drawbacks

10

Many taxpayers—especially homeowners and residents of high-tax states—will face higher federal taxes because SALT payments above the new $10,000/$5,000 caps are no longer deductible.
Taxpayers who previously benefited from larger SALT deductions may see substantially higher federal tax bills if their state and local taxes exceed the new caps.
Married couples filing separately are limited to a lower $5,000 cap, which can raise taxes for spouses who must file separately (for example due to divorce, separation, or state filing rules).

AI Insights

Analyzed 4 of 2 sections

Categories & Tags

Subjects

Individual Income Tax

Tax Credits & Deductions

Affected Groups

Taxpayers

Homeowners

Local Governments

Middle-Class Families

+1 more

Sponsors (4)

Bill Summary

Summary

Changes how much state and local tax (SALT) individuals can deduct on their federal returns by setting tiered caps based on filing status and income, and creates a new federal deduction for certain local special-assessment taxes paid for projects that directly benefit a homeowner's principal residence. Both changes apply to tax years beginning after December 31, 2026, and income thresholds are indexed for inflation beginning after 2027. Under the bill, high‑income filers above a defined threshold would lose the SALT deduction entirely, married taxpayers filing separately are limited to a $5,000 SALT deduction, and other filers are limited to $10,000. The new special-assessment deduction lets taxpayers deduct qualified local assessments used to fund projects (for example, transportation, utilities, schools, hospitals, emergency services, and dam restoration) when tied to their principal residence.

Key Points

Tiered SALT deduction caps set for tax years starting after Dec. 31, 2026: $0 for high-income filers above a threshold, $5,000 for married filing separately, $10,000 for other filers.
Creates a new federal deduction for qualified special-assessment taxes that fund local projects directly benefiting a taxpayer's principal residence.
Qualified projects for the special-assessment deduction include transportation, utilities, schools, hospitals, emergency services, and dam restoration.
Income thresholds that trigger the $0 SALT cap are adjusted annually for inflation beginning after 2027.
Both the SALT cap changes and the special-assessment deduction take effect for tax years beginning after Dec. 31, 2026.
The special-assessment deduction is limited to assessments tied to a taxpayer's principal residence and does not apply to general local taxes or assessments for non-residential property.
The bill changes tax liabilities for homeowners and other taxpayers and will require IRS guidance and additional recordkeeping for qualifying assessments.
Potential net federal revenue impact is uncertain: SALT cap tightening reduces deductions for some, while the new assessment deduction lowers taxable income for qualifying homeowners.

Pros & Cons

The bill preserves limited SALT relief for many lower- and middle-income filers and creates a targeted deduction for homeowners' special assessments, but it tightens SALT benefits for higher-earning and certain filers, shifts more federal tax burden onto residents of high-tax areas, and adds new fr(

Potential Benefits

7

Many middle- and lower-income taxpayers (AGI below thresholds) can still deduct up to $10,000 of state and local taxes, preserving some tax relief.
Homeowners of principal residences can deduct qualifying special-assessment taxes for infrastructure that directly benefits their home, lowering taxable income.
The special-assessment deduction reduces the after-tax cost of local infrastructure projects and can encourage investment in roads, water, emergency services, and utility improvements.

Potential Drawbacks

10

Many taxpayers—especially homeowners and residents of high-tax states—will face higher federal taxes because SALT payments above the new $10,000/$5,000 caps are no longer deductible.
Taxpayers who previously benefited from larger SALT deductions may see substantially higher federal tax bills if their state and local taxes exceed the new caps.
Married couples filing separately are limited to a lower $5,000 cap, which can raise taxes for spouses who must file separately (for example due to divorce, separation, or state filing rules).

AI Insights

Analyzed 4 of 2 sections

Categories & Tags

Subjects

Individual Income Tax

Tax Credits & Deductions

Affected Groups

Taxpayers

Homeowners

Local Governments

Middle-Class Families

+1 more

All Legislation

House Bill 7561HR 7561

Local Infrastructure Tax Cuts Act

Taxation

7 pages

house
senate
president

Introduced February 12, 2026 by Haley Stevens · Last progress February 12, 2026

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