If you’ve felt the pinch of the $10,000 cap on state and local tax (SALT) deductions,
relief is on the horizon. Thanks to the newly enacted One Big Beautiful Bill Act
(OBBBA), taxpayers may see significantly expanded deductions starting in 2025.
💰 New SALT Deduction Limits (2025–2029)
Under OBBBA, the SALT cap increases to:
$40,000 for married couples filing jointly
$20,000 for married filing separately
These limits will adjust annually for inflation beginning in 2026. However, unless
Congress extends the provision, the cap will revert to $10,000/$5,000 in 2030.
⚠️ Income-Based Phaseout
High earners should take note: the enhanced deduction begins to phase out if your
modified adjusted gross income (MAGI) exceeds:
$500,000 for joint filers
$250,000 for married filing separately
The phaseout reduces your deduction by 30% of the MAGI over the threshold, but
never below the original $10,000/$5,000 cap. For example, a couple with $550,000
MAGI would only be eligible to deduct $25,000, not the full $40,000.
🔄 Income vs. Sales Tax: You Still Have Options
Taxpayers may continue to choose between deducting income taxes or sales taxes—
a valuable option for those in states with low-income tax but high sales or property
taxes.
🏢 SALT Workarounds for Pass-Through Entities
State-level SALT workaround programs remain intact for S corporations,
partnerships, and LLCs. These allow entities to pay SALT at the business level and
pass the deduction through to owners—effectively bypassing the federal cap.
📊 Planning Strategies to Maximize Your DeductionTo make the most of the expanded SALT deduction, consider:
Spreading capital gains across multiple years
Staging Roth IRA conversions strategically
Leveraging your state’s SALT workaround if available
Want help tailoring these strategies to your situation? Reach out to our team—we’re
here to help you navigate the new landscape with confidence.