Well, here we go. The annoying $10,000 State and Local Taxes (SALT) cap we’ve complained about since 2018 has been quadrupled.
Yes, $40,000 dollars.
While we were distracted by beach plans and barbecue arguments, Congress passed the “One Big Beautiful Bill Act” on July 4, 2025. A patriotic little surprise for your 1040. Depending on where you live and how much you earn, this could save you thousands. Or, in classic Congress fashion, it could do almost nothing.
How We Got the SALT Cap in the First Place
Before 2018, the SALT deduction was practically bottomless. You could pile on state income taxes, sales taxes (if you lived somewhere like Florida), and those brutal property tax bills. All of it went on your federal return.
Then the 2017 Tax Cuts and Jobs Act showed up with scissors. It capped the deduction at $10,000 and told itemizers to deal with it. Most people didn’t itemize anyway, but those in high-tax states sure felt it.
What the New Law Actually Does
As of the 2025 tax year, the SALT cap jumps from $10,000 to $40,000 for single and joint filers. Married Filing Separately gets $20,000. A small 1 percent cost-of-living adjustment kicks in from 2026 through 2029.
The catch? This deal expires after 2029. In 2030, the cap drops right back to $10,000.
There’s another catch. The full $40,000 deduction only applies if your Modified AGI is under $500,000. Go even one dollar over, and the deduction starts shrinking by 30 percent per dollar. Hit $600,000 of MAGI, and you’re stuck back at the $10,000 limit. Married Filing Separately has its own cliff at $250,000 to $300,000.
Who Actually Wins Here
The biggest winners are high earners in high-tax states like New York, California, New Jersey, Connecticut, and Illinois.
The sweet spot is roughly $100,000 to $500,000 of income, combined with hefty property taxes. These taxpayers already blew past the $10,000 cap every year but weren’t earning enough to trigger the new phaseout.
If you regularly fight with the Alternative Minimum Tax or your income pushes past $600,000, this change won’t move the needle.
And because the standard deduction in 2025 is $15,750 for single filers and $31,500 for married filing jointly, many middle-income taxpayers still won’t itemize at all. For them, this is background noise.
Planning Moves That Matter
If you fall inside that sweet spot, timing matters.
- Pre-pay your property taxes. If your county sends 2026 bills in late 2025, pay early.
- Shift state estimates. Move your Q4 estimated state payment from January to December 31 so you capture it in the same tax year.
- Watch the $500,000 cliff. Defer income or accelerate deductions to keep MAGI under the limit.
- Use bunching years. One year you take the standard deduction. The next year, you load up itemized deductions like charity, medical, and now a much larger SALT number.
- PTET still works. State pass-through entity taxes aren’t capped, so business owners can keep using them.
- Age 65 bonus. Seniors get an extra $6,000 deduction, with a phaseout starting at $75,000 of income. Yes, it’s another maze.
Rental property taxes don’t count toward this cap. They’re business expenses.
Your Next Steps
Pull out your 2024 return. Look at your property taxes, income taxes, and itemized totals.
Compare that to the standard deduction for 2025. If itemizing might beat it, this new cap could help you.
Then project your 2025 income. If you’re anywhere near that $500,000 phaseout, planning early is key.
And if this feels like too much number-crunching? Call your tax pro.
A Bigger Deduction, But Only For a Minute
This law offers real savings, but only for a narrow group and only for a few years. For some taxpayers, it’s a big win. For most, it won’t make a dent. If you’re in the group that benefits, make a plan now. This window closes fast.
