If you live in a state with high income or property taxes, you have probably felt the sting of the federal cap on state and local tax (SALT) deductions. For years, that limit has been locked at $10,000, a figure that has hit taxpayers in states like New York, California and Virginia especially hard. Now, that is changing.
Beginning in 2025, the cap on the SALT deduction will increase to $40,000 for married taxpayers filing jointly (MFJ) and $20,000 for single filing taxpayers, thanks to new federal legislation. That higher limit will rise about 1% per year through 2029, giving taxpayers some much needed relief.
However, the relief is temporary. Starting in 2030, the cap will revert to $10,000 unless Congress extends the change. There’s also an income phaseout. Taxpayers with income above $500,000 (MFJ) and $250,000 (single) will see their deduction reduced, but not below the original $10,000 limit.
The higher cap mainly helps homeowners and families in high-tax states, where combined property and income taxes often exceed $10,000. If you take the standard deduction, you will not benefit from this change unless your itemized deductions now exceed the standard amount.
The window between 2025 and 2029 is your best opportunity to maximize this expanded deduction. Consider accelerating property tax or state tax payments into these years. Speak with your tax advisor to determine whether itemizing makes sense under the new higher limit. If your income is near the phase-out range, timing your deductions may help preserve more of the benefit.
While the new SALT deduction cap offers welcome relief, it is not permanent. Thoughtful tax planning, especially around timing payments and managing income thresholds, can make a real difference.
If you are unsure how this change affects your situation, now is the time to run the numbers or talk with a qualified tax advisor. Contact us online or call 800.899.4623.