SALT Deduction Changes for 2025: What Tax Professionals Need to Know

Recent legislation temporarily expands the SALT deduction cap, creating new planning opportunities — particularly for higher-income taxpayers and clients in high-tax states.

What’s Changing in 2025

For tax years 2025 through 2029, Congress increased the SALT deduction cap under the One Big Beautiful Bill Act (also known as the Working Family Tax Cut Act).

Key changes include:

·       The SALT cap increases to $40,000 for married filing jointly and $20,000 for married filing separately

·       The expanded cap is phased down for taxpayers with MAGI above $500,000 ($250,000 for MFS)

·       Both the cap and income thresholds are indexed for inflation through 2029

Unless extended, the SALT cap will return to $10,000 in 2030.

IRS Rules That Still Apply

SALT deductions remain itemized deductions claimed on Schedule A (Form 1040). Deductible taxes include:

·       State and local real estate taxes

·       Personal property taxes based on value

·       State and local income taxes, or alternatively, sales taxes

Federal taxes, payroll taxes, HOA fees, and service charges remain nondeductible.

Key Planning Considerations

·       Revisit itemization decisions: The higher SALT cap may make itemizing beneficial again for many clients.

·       Watch income thresholds: Clients near phase-down limits may see reduced benefits and require proactive income planning.

·       Consider timing strategies: Property tax payment timing may affect deduction outcomes.

·       Continue PTET planning: Pass-Through Entity Tax elections remain an effective SALT workaround for eligible business owners.

What to Communicate to Clients

Clients in high-tax states may see meaningful benefits from the expanded cap, while higher-income clients should understand how income levels affect deductibility. Because the changes are temporary, SALT planning should be incorporated into multi-year tax strategies.

The 2025 SALT updates can significantly affect individual itemized deductions

Tax professionals should understand the new limits, apply IRS guidance consistently, and help clients plan both now and for the scheduled reversion in 2030.

To learn more about tax law updates and changes, download our recent version of the Season Readiness Guide.