Stop Losing Out on SALT: Unlock up to $40,000 in Deductions

The state and local tax (SALT) deduction cap has been raised from $10,000 to $40,000 for married couples filing jointly under the One Big Beautiful Bill Act. For taxpayers in high-tax states, this change could mean thousands in additional federal tax savings.

Understanding the Change

Since 2018, the SALT deduction has been capped at $10,000 ($5,000 for married filing separately). This disproportionately affected taxpayers in high-tax states like California, New York, New Jersey, and Connecticut. The new $40,000 cap provides significant relief.

Who Benefits Most

Taxpayers who will see the greatest benefit have high state income taxes (often in states with rates of 9%+), significant property taxes (common in high-cost-of-living areas), and sufficient other itemized deductions to exceed the standard deduction.

The Math

Consider a married couple in New Jersey with $15,000 in property taxes and $25,000 in state income taxes. Under the old $10,000 cap, only $10,000 was deductible. Now, the full $40,000 is deductible—an additional $30,000 deduction. At a 32% marginal rate, that's $9,600 in federal tax savings.

Planning Strategies

Prepayment Analysis: Consider whether prepaying property taxes or state estimated taxes before year-end maximizes your deduction.

Itemization Review: Higher SALT deductions may push some standard deduction users back into itemizing.

Multi-State Planning: For those with flexibility in residence, the SALT deduction changes may affect state relocation decisions.

Coordination With AMT

SALT deductions aren't allowed for Alternative Minimum Tax purposes. Higher-income taxpayers should model AMT exposure when planning around the increased SALT cap.