SALT Deduction Cap May Rise to $40K: What It Means for Your Taxes
What Is the SALT Deduction?
When you pay taxes to your state or local government, you may be able to deduct those amounts from your federal tax bill. This is called the State and Local Tax deduction, or SALT deduction for short.
Right now, the most you can deduct is $10,000. This cap was set by the Tax Cuts and Jobs Act of 2017. It has affected many people who live in places with high property or income taxes, like California, New York, and New Jersey.
What’s Happening Now?
A new tax bill is being debated in the U.S. Senate. The House of Representatives has already approved a plan to raise the SALT deduction cap from $10,000 to $40,000. That’s a big increase!
Supporters of this plan say it will help people in high-tax states save money. But not everyone agrees. Some lawmakers in the Senate worry that this change would cost too much money and mostly benefit wealthier taxpayers.
Because the House and Senate are very close in numbers, even small changes to the bill could cause problems. If the Senate makes too many edits, the bill could fail.
Why Does This Matter to You?
If you live in a state with high property or income taxes, this change could help you a lot. For example:
- If your property taxes are $12,000, you currently can only deduct $10,000.
- But if the new law passes, you could deduct the full $12,000—or even more, up to $40,000.
- This could lower your federal taxes and leave more money in your pocket.
Even if you don’t think this applies to you now, it’s still a good idea to understand the basics. Tax laws change often, and smart planning can help you save money over time.
Who Supports the SALT Deduction Cap Increase?
Many lawmakers from high-tax states support raising the cap. They say the $10,000 limit is unfair and hurts middle-class families. In some places, homeowners can pay $15,000 or more in property taxes alone.
Supporters also believe this change would:
- Help families keep more of their income
- Make the tax system more fair for states with higher costs of living
- Encourage people to itemize deductions instead of taking the standard deduction
Who Is Against It?
Some Senators—especially those from states with low taxes—do not like the idea. They say:
- It would mostly help rich people who own big homes
- It would reduce tax revenue by billions of dollars
- It’s not fair to taxpayers in states with lower taxes
They also worry that passing this part of the bill might make it harder to agree on the rest of the plan.
What Should You Do Now?
Even though this change is not a law yet, you can still take smart steps to prepare. Here are some simple things you can do:
1. Know Your Numbers
Take a look at your last tax return. Did you itemize your deductions, or take the standard deduction? How much did you pay in state income and property taxes?
2. Talk to a Tax Professional
A CPA or tax advisor can help you understand how the proposed changes might affect you. They can also give you ideas on how to lower your taxes now, using current rules.
3. Consider Timing
If this law passes later this year, your 2025 tax return could look very different. Think about the timing of big expenses—like property taxes, charitable giving, or business purchases—that might help you itemize more deductions.
4. Watch for Updates
Tax laws can change quickly. Follow trusted news sources or sign up for updates from your CPA so you don’t miss any important news.
How We Can Help
At Elite Consulting, P.C., we watch tax law changes closely. If the SALT cap is raised, we’ll help you take full advantage of it. Even if it doesn’t pass, we can guide you through smart tax strategies that save you money now.
We help clients with:
- Tax planning and preparation
- State-specific deduction strategies
- Business tax optimization
- Trust and estate planning
Let’s make sure your tax plan is ready—no matter what Congress decides.