What Does The SALT Cap Increase Mean For My Taxes?

Written By Seth Beverly

As a New York homeowner, the recent changes to the State and Local Tax (SALT) deduction cap, as part of the "One Big Beautiful Bill Act," can significantly impact your tax situation.1 Here's an explanation of the changes and some practical actions you can take.

As a New York homeowner, the recent changes to the State and Local Tax (SALT) deduction cap, as part of the "One Big Beautiful Bill Act," can significantly impact your tax situation.1 Here's an explanation of the changes and some practical actions you can take.

***This is not tax, financial or legal advice. Consult a tax accountant to ensure that your financial obligations are met and properly handled. The purpose of this article is to share opinions based on limited knowledge and research about a topic that should be of interest to my consumer base.

The New SALT Cap and How It Affects You

The "One Big Beautiful Bill Act" has brought about a significant, though temporary, change to the SALT deduction.2 Previously, the Tax Cuts and Jobs Act (TCJA) of 2017 limited the amount of state and local taxes that individuals could deduct from their federal taxable income to a maximum of $10,000.3 For many New Yorkers with high property and income taxes, this cap was a major point of concern, as their total SALT payments often far exceeded this limit.4

The new legislation retroactively increases the individual SALT deduction cap to $40,000 for the tax year 2025.5 This is a substantial increase that will provide considerable relief to many homeowners in high-tax states like New York.6 The cap is scheduled to increase incrementally in the following years: to $40,400 in 2026, and by an additional 1% in 2027, 2028, and 2029.7

However, this increased deduction is not available to everyone. It begins to phase out for taxpayers with a modified adjusted gross income (MAGI) exceeding $500,000.8 For those whose MAGI is above this threshold, the deduction is reduced by 30% of the excess income.9 The cap will not be reduced below the original $10,000 floor, ensuring a baseline benefit for high earners.10 It's important to note that this enhanced cap is temporary and is scheduled to revert to the original $10,000 limit beginning in 2030, unless further legislative action is taken.11

Practical Actions to Take When Filing

This is not tax, financial or legal advice. Consult a tax accountant to ensure that your financial obligations are met and properly handled.

To take full advantage of this change, here are some practical actions you should consider:

1. Itemize Your Deductions

The SALT deduction is only available if you itemize your deductions on your federal tax return.12 With the higher cap, it is more likely that your total itemized deductions (including SALT, mortgage interest, charitable contributions, etc.) will exceed the standard deduction. You should compare your total itemized deductions to the standard deduction for your filing status to determine which option is more beneficial for you.

2. Maximize Your SALT Deductions

Remember that the SALT deduction includes state and local income taxes, property taxes, and either sales tax or income tax (you can't deduct both income tax and sales tax).13 For most New York homeowners, the combination of state income tax and property taxes will easily surpass the new cap, and you'll want to make sure you're claiming all eligible taxes paid.14 Be sure to keep meticulous records of your property tax payments, as well as any state and local income taxes you paid throughout the year.

3. Consider the Pass-Through Entity Tax (PTET)

For New York homeowners who are also owners of a partnership or S-corporation, New York's Pass-Through Entity Tax (PTET) remains a valuable tool.15 The "One Big Beautiful Bill Act" does not restrict the federal deductibility of these state-level workarounds. This allows the business to pay state income tax at the entity level, which is not subject to the federal SALT cap. The owners of the business then receive a corresponding credit on their state personal income tax return. For many, this offers an "above the line" deduction at the entity level, meaning the full amount of state and local income taxes paid by the business can reduce federal taxable income, regardless of the individual owner's AGI or the new phase-out thresholds.1617

4. Plan for the Future

Since the increased cap is temporary and is set to expire in 2030, it is crucial to plan strategically for the coming years.18 Consider the impact of the phase-out rules if your income is near or above the $500,000 threshold. It may also be a good time to re-evaluate your long-term tax strategy with a professional, especially if you have been relying on the New York PTET.

By understanding these changes and taking these actions, you can better manage your tax liability and take advantage of the temporary increase in the SALT cap. It is always a good idea to consult with a qualified tax professional to ensure you are maximizing your tax benefits based on your specific financial situation.

For more detailed information: See the National Association of Realtors article, which was a source for this article, Here

Additionally the NAR page released to highlight details of the new policy is found at the link below.