State and Local Tax (SALT) Deduction Increased to $40,000
What the New SALT deduction Limit Means for Taxpayers
One of the most significant recent changes to federal tax law is the increase in the State and Local Tax (SALT) deduction limit. Beginning with tax year 2025, the maximum SALT deduction increased to $40,000 per tax return for taxpayers who itemize deductions. Married taxpayers filing separately are limited to $20,000.
Income Limits Still Apply
For higher‑income taxpayers, the SALT deduction begins to phase down once income exceeds approximately $500,000.
As income rises further, the deduction gradually declines, potentially returning to the prior $10,000 limit.
Because of this phase‑out, the largest benefits will generally go to taxpayers below the highest income brackets.
This article is for informational purposes only and should not be considered tax advice.
What the Limit Used to Be Under the Tax Cuts and Jobs Act of 2017
The SALT deduction was capped at $10,000 per return ($5,000 for married filing separately).
This cap applied to the combined total of: state income taxes, local income taxes, and property taxes on real estate.
For taxpayers in states with higher income taxes or high property values, the $10,000 cap significantly reduced the benefit of itemizing deductions. The new legislation raises the cap to $40,000, effectively quadrupling the previous limit
Planning Opportunities
The increased SALT deduction may affect several tax planning decisions, including:
• Whether to itemize deductions
• Timing of state tax payments
• Planning for property tax payments
• Evaluating pass‑through entity tax elections for business owners
Because the new SALT rules interact with other federal tax provisions, taxpayers may benefit from reviewing their situation with a tax professional.
Who Benefits the Most?
The taxpayers most likely to benefit from the higher SALT deduction include:
• Homeowners with significant property taxes
• Taxpayers living in states with higher state income taxes
• Households whose itemized deductions exceed the standard deduction
Many taxpayers will still claim the standard deduction, which means the SALT deduction will not affect their return.
However, taxpayers who already itemize—particularly homeowners in higher‑tax areas—may see a meaningful reduction in their federal taxable income.
If you have questions about how the SALT deduction affects your tax return or your long‑term tax planning, please contact us at GurelCPA to schedule a free consultation to discuss your specific situation.