2025 Changes to SALT Deductions

The recently enacted One Big Beautiful Bill Act introduces significant changes to the State and Local Tax (SALT) deduction beginning with the 2025 tax year. These revisions impact individual taxpayers, high earners, and owners of pass-through entities. Here’s what you need to know.

Increased Deduction Cap

• The SALT deduction cap has been raised from $10,000 to $40,000 for joint filers.
• For married filing separately, the cap is $20,000.
• Apply to state and local income, property, and elective sales taxes.
• Particularly in high-tax states, more taxpayers may benefit from itemizing deductions rather than taking the standard deduction of $31,500 for joint filers and $15,750 single and MFS.

Income-Based Phase-Out

• For joint filers with Modified Adjusted Gross Income (MAGI) over $500,000, the deduction is reduced by 30% of the amount above the threshold, down to a floor of $10,000.
• For married filing separately, the phase-out starts at $250,000, with a floor of $5,000.
• Taxpayers near the phase-out thresholds could consider strategic income deferral or timing to help manage this impact.

Annual Inflation Adjustments

• From 2026 to 2029, the cap and thresholds will increase 1% annually.
• The cap reverts to $10,000 in 2030 unless extended by future legislation.

If you would like to learn more about if you could benefit from these SALT deductions or to set up a consultation, call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730.

The above information is of a general nature only and should not be relied upon for specific situations.