Speaker Mike Johnson (R-La.) and a group of moderate Republicans have come to an understanding regarding the state and local tax (SALT) deduction cap, resolving a significant issue that has plagued their grand legislative plan, according to three sources who spoke to The Hill.

The agreed-upon proposal aims to raise the SALT deduction cap to $40,000, which is four times the existing $10,000 cap, for individuals earning $500,000 or less annually, as reported by three sources. Additionally, one source mentioned that the cap would be adjusted upwards by 1 percent each year over a decade.

This adjustment represents an increase from the previous proposal of a $30,000 cap for those making up to $400,000 — a measure strongly opposed by members of the SALT Caucus. The House Rules Committee is set to meet at 1 a.m. on Wednesday to review the bill’s amendments.

While several members of the SALT Caucus are supportive of the plan, according to sources, Johnson will need to sell the proposal to hardline conservatives — including many in the House Freedom Caucus — who have been resistant to a significant hike to the deduction cap.

Exiting a meeting in the Speaker’s office Tuesday night, members of the SALT Caucus said they did not yet have a firm deal, but signaled significant progress.

“We weren’t even in the same universe a couple of days ago. We’re on the same ballfield now,” Rep. Nick LaLota (R-N.Y.) told reporters.

Still, the agreement between Johnson and the SALT Caucus is a massive step forward in passing the party’s “big, beautiful bill.” The Speaker and moderate Republicans from high-tax blue states struggled for weeks to find consensus on the critical — yet tedious — issue, trading proposals behind closed doors.

Rep. Elise Stefanik (R-N.Y.) — who is considering a run for governor — stepped in to become a more active part of negotiations after unexpectedly withdrawing from her United Nations Ambassador nomination. Sources said that she had told Johnson that he had to move on the $30,000 figure, which she had said was “insulting” in a joint statement with fellow SALT-focused New Yorker Republican Reps. Mike Lawler, Andrew Garbarino, and LaLota.

Stefanik, though, notably did not join a statement with five core SALT Republicans on Tuesday following Trump’s visit with House Republicans on Capitol Hill.

Trump had told lawmakers earlier on Tuesday to “let SALT go,” signalling support for the $30,000 cap and telling reporters that it would benefit “Democrat governors.” He took specific aim at Lawler, one of the most outspoken about making greater changes to the SALT deduction.

Lawler held the line in the immediate aftermath of Trump’s speech, saying he was “not budging.”

But later in the day, after SALT Caucus meetings in the Speaker’s office, Lawler said GOP leaders have floated “an improved offer” to members of the SALT Caucus, and the lawmakers were waiting for cost estimates to arrive from the Joint Committee on Taxation.