Big Changes Ahead: SALT Deduction Rising to $40,000 in 2025
Did you know the SALT (State and Local Tax) deduction is getting a major increase starting in 2025? For many taxpayers, this is a big deal. Let’s break it down.
A Quick Look Back
In 2018, the Tax Cuts and Jobs Act nearly doubled the standard deduction:
- $12,700 → $24,000 (married filing jointly)
This simplified filings for many families—but it also meant fewer people itemized their deductions. Your mortgage interest, medical expenses, and charitable donations had to exceed that higher threshold to be worthwhile.
Meanwhile, the SALT deduction—covering state and local income and property taxes—was capped at $10,000. That cap has been in place for years, frustrating taxpayers in high-tax states.
What’s Changing in 2025
Thanks to the new “Big, Beautiful Tax Bill,” the SALT deduction cap is temporarily increasing to $40,000 for tax years 2025 through 2029.
Sounds like a win, right? Well, there’s a catch.
The Catch: Income Limits
If your modified AGI exceeds $500,000, you’ll start losing part of this deduction.
Example:
- AGI = $580,000
- State taxes paid = $40,000
- $80,000 over the income limit
- Reduction = 30% of that excess = $24,000
So, your SALT deduction would shrink from $40,000 to just $16,000.
What This Means for You
- Middle-income taxpayers in high-tax states: Could see a significant benefit from the higher SALT cap.
- High-income taxpayers: May not benefit as much due to phase-outs.
The Bottom Line
The increase to $40,000 may help some taxpayers, but it won’t benefit everyone equally. As always, the best strategy is to stay informed and plan ahead.
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