The SALT Cap Jumps to $40K in the Big Beautiful Bill
First of all, isn't it funny that all media just refers to this bill as the "big beautiful bill," as if that's an actual name for a consequential bill that will affect taxpayers of all kinds in this country? Every time I write or say it, I laugh.
Well, the big beautiful bill (lol) is final. And the most contentious part of the new tax bill wasn’t the size of the child tax credit or deductions for overtime. It wasn’t even the cuts to Medicaid.
It was the State and Local Tax ("SALT") deduction cap.
And it nearly blew the whole thing up.
After weeks of infighting—House Republicans from high-tax states on one side, Senate Republicans from low-tax states on the other—we now have our answer: the SALT deduction cap is $40,000, up from $10,000, effective in 2025.
But this change is more complicated than it looks. It’s a gift for some, a trap for others, and a planning minefield for just about everyone.
Let’s unpack what this means for your clients.
Why This Matters for Your Clients (and for You)
If you’re advising high-earning W-2 employees in states like California, New York, New Jersey, or Illinois…
Or you’re working with business owners in pass-through entities like S corps and partnerships…
Or even if your clients are just inching toward six-figure incomes and trying to figure out if they should itemize next year…
This change affects them.
Sure, the SALT cap increased on its face but it's important to understand who actually benefits, who doesn’t, and how to get ahead of things when the law reverts in 2030.
So here are five key takeaways you need to know.
1. The SALT Cap Quadrupled—But Only for a Narrow Group
Starting in 2025, taxpayers can deduct up to $40,000 in state and local taxes. That’s great news for clients who pay high state income or property taxes.
But the benefit phases out for those with income above $500,000, and it disappears entirely by $600,000.
So a married couple earning $499,000? They can deduct $40,000.
A couple earning $601,000? They’re back to $10,000.
That’s a sharp cliff—and one that will affect clients with variable income, bonuses, or investment gains that bump them over the line.
2. Most Business Owners Can Still Side-Step the Cap
Pass-through entities in many states can still use SALT cap workarounds by paying state taxes at the entity level. Those taxes are fully deductible.
What does that mean in real numbers?
A business owner with $1 million in income and $60,000 in state taxes could still deduct the full $60,000.
A business owner with $30 million in income and $2 million in state taxes? That’s a potential deduction worth up to $740,000.
So while high-income W-2 employees hit a wall at $40,000 (or less), business owners are still playing by a different set of rules.
3. Itemizing Just Got Interesting Again
Since 2017, most clients haven’t itemized. The standard deduction was generally the better deal.
But this SALT cap expansion changes that for some.
Look at a single filer in California making $330,000 and paying $30,000 in state income taxes.
Under the old $10,000 cap, itemizing didn’t make sense but under the new law, they can deduct all $30,000, easily beating the $15,750 standard deduction for 2025.
Add mortgage interest and charitable giving to the mix, and suddenly itemizing is back in the picture.
This could be a major planning opportunity.
4. Married Couples Are Probably Still Taking the Standard Deduction
The new SALT cap is $40,000 whether you're filing single or married.
But the standard deduction for married couples is double: $31,500 in 2025.
So they need at least that much in SALT and other deductions to even consider itemizing. For many couples, even in high-tax states, that math won't math—especially if their state income taxes are modest and their mortgage is paid off.
5. Timing and Withholding Now Matter More Than Ever
These changes take effect in 2025, but clients should plan ahead to take advantage of the benefits of the Big Beautiful Bill (lolol) by adjusting their withholding or estimated payments now.
For clients straddling the $500K income cliff, being under makes a huge difference. Accelerating deductions, deferring income, charitable giving, and retirement contributions all take on new significance in managing eligibility for the full SALT deduction.
TL;DR – What You Should Know About the SALT Expansion
⏩ The SALT deduction cap jumps from $10K to $40K starting in 2025.
⏩ The benefit starts phasing out at $500K income and vanishes by $600K.
⏩ Business owners using pass-through entities can still deduct all SALT via workarounds.
⏩ Itemizing becomes viable again for some clients—especially high earners in high-tax states.
⏩ Married couples face more hurdles than singles due to how standard deductions are structured.
Let’s Talk...
➤ Do you see clients shifting back to itemizing with the changes to the SALT cap?
➤ Do you think the increase in the SALT cap is a good thing? Why or why not?
➤ Maybe Nicole McClintock, CPA would weigh in?
➥ Contact Attorney Stephen A. Weisberg for a free Tax Debt Analysis.
Contact Me Here: https://www.weisberg.tax/contact-1
Email: sweisberg@wtaxattorney.com
Phone/Text: (248) 971-0885
Address: 300 Galleria Officentre, Suite 402, Southfield, MI 48034
