The OBBB Brings Big Beautiful Changes to the SALT Deduction Cap – Temporarily

The One Big Beautiful Bill Act (OBBB) will temporarily increase the state and local tax (SALT) deduction cap introduced by the Tax Cuts and Jobs Act in 2017. This cap increase will unevenly impact taxpayers, with those in high-tax states and property owners with significant real estate tax bills benefiting the most. The adjustment to the SALT deduction cap begins with 2025 tax returns, so taxpayers have a limited time to update tax planning strategies to take full advantage.  

One Big Beautiful Bill Brings Changes to SALT Deduction Cap 

President Donald Trump signed the OBBB into law on July 4, 2025, which immediately created the following changes: 

  • Temporarily increases the SALT deduction from its TCJA limit of $10,000 to $40,000 for households with an adjusted gross income (AGI) at or below $500,000 
  • Married taxpayers who file separately are subject to a $20,000 limit 
  • Both the $40,000 and the $500,000 limit are subject to an annual 1% inflation adjustment 

The updated SALT deduction phase-out for high earners begins when your modified adjusted gross income (MAGI) exceeds $500,000 if you’re a single filer or married and filing jointly. For married couples filing separately, the limit is $250,000. Once those limits are exceeded, taxpayers can expect to see their SALT cap reduced by 30% of the excess income, but the deduction can’t fall below the TCJA limits of $10,000, or $5,000 if married filing separately.  

In 2026, the SALT deduction cap for joint and single filers is expected to rise to $40,400. Married taxpayers filing separately will see their cap increase to $20,200. Annual 1% increases will occur between 2027 and 2029 before the OBBB’s updated SALT deduction limits sunset in 2030. It’s important to take advantage of these planning opportunities while they’re still here.  

The SALT deduction changes are active for the 2025 tax year, giving taxpayers very little time to react. It’s highly recommended that you seek advice from a tax professional if you’re unsure how this change will affect your tax planning.  

Maximizing Your SALT Deduction 

There are several different strategies taxpayers can use to fully maximize SALT deductions. Consult with your tax advisor or professional to help determine whether the following strategies are right for your situation: 

  • Accelerate property tax payments in December 
  • Bundle together multiple years of personal property taxes if applicable 
  • Make payments toward your state tax bill before year-end 

High-income individuals also have a few strategies to reduce their tax burden: 

  • If possible, defer income near your phase-out thresholds 
  • Look into Roth conversions in years where you have lower than usual income 
  • Try to time your capital gains realizations strategically around threshold limits 

Regardless of whether you’re a high-earner or not, all taxpayers will be subjected to the 2030 SALT deduction reversion. If possible, try to plan your major purchases or moves while keeping the potential tax implications in mind. It’s possible that relocating to a lower-tax state may be more in your financial interest once the deduction returns to $10,000 for tax year 2030.  

Anders Tax advisors have been closely examining the One Big Beautiful Bill Act to determine how businesses and individuals like yourself can reduce your tax burden and take advantage of expanded opportunities. Join our live webinar on August 12th to learn more. 

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