Who does the large SALT increase benefit?

Significant changes have been made to the State and Local Tax (SALT) deduction limit with the enactment of the tax and spending legislation signed into law by President Trump July 4. The new SALT deduction is expected to benefit itemizers in high-tax states and cities, particularly owners with substantial property and income tax burdens, and individuals and couples below the income phase-out thresholds.

Here’s a summary of the new SALT deduction:

• Increased Limit: The cap on the SALT deduction has been increased from $10,000 to $40,000 for tax year 2025.

• Temporary: This increased amount is not permanent. It is scheduled to increase by 1 percent each year through 2029 and then revert to the original $10,000 cap starting in 2030.

• Income Phase-out: The ability to deduct the full $40,000 is limited to households with modified adjusted gross income (MAGI) of $500,000 or less ($250,000 for married couples filing separately). Above these thresholds, the deduction amount will be reduced by 30 percent of the income exceeding the threshold, although it cannot fall below $10,000.

• Eligibility: Only taxpayers who itemize their deductions can benefit from the SALT deduction.

A boosted SALT cap will make it more advantageous for many homeowners, especially those living in high-tax states such as New York, New Jersey and California, to start itemizing their taxes once again.

The decision to itemize or take the standard deduction depends on which option provides a greater tax benefit. You cannot do both.

Barry Lisak is an IRS enrolled agent specializing in personal and small business taxes for 30 years. Any questions can be directed to him at 516-829-7283, or mrbarrytax@aol.com.