2025 SALT Deduction Cap Increase: Who Qualifies & How To Maximize Your Tax Savings

A new federal tax change taking effect in 2025 could make a noticeable difference in how much you owe in taxes. Under the One Big Beautiful Bill Act (OBBBA), the cap on the state and local tax (SALT) deduction will rise from $10,000 to $40,000 ($20,000 for married couples filing separately), giving many households a chance to cut thousands from their taxable income.

This update marks one of the most substantial tax code changes since the Tax Cuts and Jobs Act (TCJA) took effect in 2018. For residents of high-tax states, especially homeowners, the higher SALT cap could mean a noticeably smaller federal tax bill.

Below is a closer look at what’s changing and who stands to benefit.

The State and Local Tax (SALT) deduction gives taxpayers who itemize their returns a way to reduce their federal taxable income by accounting for certain state and local taxes they’ve already paid. The idea behind it is to help ease the impact of double taxation, which is when someone is taxed by their state and the federal government on the same income.

This deduction typically covers:

• State and local income taxes (or sales taxes, if that option is chosen instead)
• Property taxes on a home or other real estate
• Personal property taxes, like car registration fees, are based on the vehicle’s value

Before 2018, there wasn’t a set limit on how much could be deducted under SALT. That changed when the Tax Cuts and Jobs Act (TCJA) introduced a cap: $10,000 per year, or $5,000 for married individuals filing separately. That cap had a noticeable impact, especially for homeowners and residents in states with high taxes, such as California, New York, New Jersey, and Illinois, where combined property and income taxes often surpass the limit.

Looking ahead to 2025, the planned increase to the SALT deduction cap is meant to ease some of that strain. The change is expected to restore a measure of relief for many middle- and upper-middle-income households who have seen their deductions limited in recent years.

Starting with the 2025 tax year, the SALT deduction cap will increase from $10,000 to $40,000 ($20,000 for married couples filing separately). This adjustment represents a substantial, though temporary, expansion compared to prior years.

However, not all taxpayers will qualify for the full benefit of the increased limit. The deduction begins to phase out for individuals earning more than $500,000 in modified adjusted gross income (MAGI). It gradually decreases as income goes up and drops back to the original $10,000 cap once income reaches $600,000. (For those filing separately, these income limits are cut in half.)

The reduction of the deduction limit is calculated by applying a 30% rate to the amount by which the taxpayer’s modified adjusted gross income (MAGI) exceeds the $500,000 threshold. As a result, once a couple’s MAGI reaches $600,000, the maximum deduction returns to $10,000. For married individuals filing separately, both the thresholds and deduction limits are reduced by half. In addition, the OBBBA provides for a 1% annual increase in these limits and thresholds through 2029.

It’s also worth noting that this change only applies to taxpayers who itemize deductions. If you usually take the standard deduction, the higher SALT cap won’t affect your return or reduce your taxable income.

This adjustment is part of a temporary expansion scheduled to last through 2029. Unless Congress acts to extend it, the deduction cap will revert to $10,000 starting in 2030.

The new SALT deduction cap does not apply to everyone. To qualify, you must itemize deductions on Schedule A of your federal tax return. If you usually claim the standard deduction, you will not benefit from the higher cap.
To make itemizing worthwhile, your total itemized deductions, including SALT, mortgage interest, and charitable donations, should be higher than the standard deduction amount for your filing status.

While taxpayers in high-tax states or with large property tax bills may see the biggest savings, the key requirement is simply choosing to itemize instead of taking the standard deduction.

The amount you could save under the 2025 SALT deduction cap increase depends on your filing status, income, and how much you pay in state and local taxes.
Here’s an example:

• A married couple paying $35,000 in combined state income and property taxes could previously deduct only $10,000.
• With the new $40,000 cap, they can now deduct the full $35,000.
• If they’re in the 35% federal tax bracket, that’s a potential tax savings of roughly $8,750 more than before.

Before filing your 2025 return, consider these practical tips to make the most of the new limits:

• Evaluate if itemizing makes sense: Remember that not everyone is eligible and that if your total exceeds the standard amount, itemizing could lower your taxable income more effectively.
• Track your property and local tax payments: Keep accurate records of all state, local, and property taxes paid in 2025.
• Review your income level: If your modified adjusted gross income (MAGI) is close to the $500,000 phase-out threshold (for joint filers), explore timing strategies for bonuses, deductions, or contributions that could help you stay under the limit.
• Plan charitable giving strategically: Combining charitable donations and other deductible expenses in the same year, known as bunching, may help you exceed the standard deduction and qualify for greater itemized savings.
• Consult a qualified tax professional: The new rules can get complex, especially with income-based phase-outs and itemization thresholds. A tax lawyer can help identify personalized ways to maximize your deduction.

With the increase to the 2025 SALT deduction cap, now is the ideal time to review your tax strategy and ensure you’re positioned to take full advantage of these changes. At Silver Law, PLC, we help individuals and business owners make informed, compliant tax decisions under evolving IRS regulations.

Schedule a consultation with our experienced tax attorneys for strategic guidance designed to maximize your deductions and protect your financial interests.