What It Means For Your 2025 Tax Returns
The SALT cap is raised from 10,000 dollars to roughly 40,000 dollars beginning with tax year 2025, providing a much larger potential deduction for state and local taxes.
For years, many of our clients in high‑tax states have felt squeezed by the 10,000 dollar federal cap on the state and local tax (SALT) deduction. With recent federal tax legislation, that cap has now been significantly increased for a limited window of years.
As your trusted tax advisory firm, our goal is to help you understand what changed, who benefits, and the proactive steps you can take before filing your next return.
The SALT deduction allows individual taxpayers who itemize to deduct certain state and local taxes on their federal income tax return.
These typically include:
- [State and local income taxes] OR [sales taxes].
- Real estate property taxes
- Certain personal property taxes such as those on vehicles
The benefit of the higher SALT cap begins to phase out once your modified adjusted gross income (MAGI) exceeds a certain level (for example, 500,000 dollars for joint filers in 2025.
Higher‑tax‑bracket homeowners, especially those in expensive housing markets, may now be able to deduct a far larger portion of their property taxes than under the old 10,000 dollar cap.
With a higher SALT cap and rising mortgage interest in some cases, more taxpayers may find that itemizing now exceeds the standard deduction threshold. We can run projections to determine whether itemizing or taking the standard deduction produces the lower overall tax liability in your situation.
For clients whose incomes hover near the phaseout thresholds (for example, around 500,000 dollars to 600,000 dollars of MAGI), deferring or accelerating income or deductions may prevent the SALT benefit from being substantially reduced. Tools include timing of bonuses, capital gains recognition, and retirement contributions, among others.
This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently, and their application can vary widely based on the specific facts and circumstances. You should consult with a qualified tax professional before making any decisions based on this information.