Maximize your State and Local Tax (SALT) deduction
The OBBBA temporarily quadruples the so-called “SALT cap.” For 2025 through 2029, taxpayers who itemize can deduct up to $40,000 ($20,000 for separate filers), with 1% increases each subsequent year, meaning $40,400 in 2026 and so on. Deductible SALT expenses include property taxes (for homes, vehicles and boats) and either income tax or sales tax, but not both. The SALT cap is scheduled to return to the TCJA’s $10,000 cap ($5,000 for separate filers) beginning in 2030.
In the meantime, the temporary limit increase could substantially boost your tax savings, depending on your SALT expenses and your modified adjusted gross income (MAGI). The allowable deduction drops by 30% of the amount by which your MAGI exceeds a threshold of $500,000 ($250,000 for separate filers). When MAGI reaches $600,000 ($300,000 for separate filers), the $10,000 (or $5,000) cap applies.
If your 2025 SALT deductions exceed the old $10,000 cap but your total itemized deductions would still be under the standard deduction, “bunching” could help you make the most of the higher SALT cap. For example, if you receive your 2026 property tax bill before year end, you can pay it this year and deduct both your 2025 and 2026 property taxes in 2025. You might increase the deduction further by accelerating estimated state or local income tax payments into this year, if applicable. You could bunch other itemized deductions into 2025 as well.
In 2026, you’d go back to claiming the standard deduction. And then you’d repeat the bunching for the 2027 tax year and itemize that year.
Don’t miss out on both new and traditional tax planning opportunities to reduce your 2025 taxes. The best strategies for you depend on your specific situation. We’d be pleased to help you with your year-end tax planning. Call one of our tax experts at (888) 388-1040.
Jeff Rislov, CPA and Partner comments,
“The temporary quadrupling of the SALT deduction cap offers a rare window for significant federal tax savings, but the benefits hinge on your income level and timing. Careful year-end planning with one of our experts—like managing your MAGI and considering whether to itemize—can make all the difference in maximizing your deduction under these new rules.”
