The SALT deduction has been a subject of much contention, as it aims to provide relief to taxpayers in high-tax states. The SALT deduction rule corrects double taxation; however, some view the cap as unfairly taxing income that has already been paid to state or local governments. The recent expansion of the cap under the ‘One Big Beautiful Bill Act’, signed into law in July 2025, reduces the homeowner’s tax burden. Conversely, the SALT deduction is seen as a boon for the wealthy, costly to federal revenue, and complicating the tax code.

Here’s Profitjets breaking down what the SALT deduction means, who benefits from it, and how a tax professional could make a difference to help you file your taxes while considering the SALT deduction.

Table of Contents

What is SALT deduction?

The State and Local Tax deduction or the SALT deduction, is a federal income tax deduction as per a rule in the U.S. tax code that allows you to deduct some state and local taxes (subject to the SALT deduction cap) that have already been paid as federal taxable income as income tax, property tax, or sales tax earlier. The rule could reduce your total federal tax liability.

What Taxes Are Included Under the SALT deduction?

You can choose to deduct either State and local income taxes, OR State and local sales taxes. In addition to this, you can also deduct State and regional real estate taxes and State and local personal property taxes.

Who qualifies for SALT deduction?

To qualify for SALT deduction, you must itemize deductions. You cannot take both the standard deduction and SALT deduction. To benefit, your total itemized deductions must exceed the standard deduction, with the latest limits being $31,500 for married couples filing jointly and $15,750 for singles.

What is the latest SALT deduction Cap?

The SALT cap is raised to a higher limit of $40,000 for married filers and $20,000 for married filers filing separately, under the One Big Beautiful Bill Act signed into law on July 4, 2025, by President Trump.

As per the previous SALT deduction cap, the Tax Cuts and Jobs Act enacted in 2017 capped it at $10,000 per year for individuals and married couples filing jointly. It was $5,000 per year for married individuals filing separately. The SALT deduction cap has now increased from $10,000 to $40,000.

The full benefit of the income threshold is when your Adjusted Gross Income (AGI) is $500,000 or less, whereas the income threshold is $600,000 for joint filers. Above this income limit, the allowable deduction phases out, returning to $10,000.

Who benefits from the SALT deduction?

The actual beneficiaries of the SALT deduction:

You stand to benefit from the SALT deduction if you live in a state that has higher taxes, if you are a property owner, or if you are a business owner with a decent income (but your annual income is below $500,000).

You may benefit from the SALT deduction to lower your federal taxes if you run a business. However, you must itemize your deductions.

Here’s a breakdown of who the actual beneficiaries are

1. Homeowners in high-tax states pay significantly higher state & local taxes.

If you live in a high tax-paying area like New York, New Jersey, or California (states that charge higher income and property taxes). And if you are a homeowner who pays big property tax bills

You’re likely to pay more than $10,000 in state & local taxes. The SALT deduction helps you reduce your federal taxes on the amount.

2. Itemizers whose SALT + other deductions exceed the standard deduction.

You can either take a standard deduction or list your expenses line by line, known as itemizing.

If you have high SALT taxes, a considerable mortgage interest, or have made qualified charitable donations, itemizing may reduce your tax bill more than the standard deduction.

It’s important to note that if your total itemized deductions don’t exceed the standard deduction, you don’t benefit from SALT at all.

3. Middle-to-upper-income households with MAGI under $500k

If your income is between $100,000 and $500,000 annually and you pay a significant amount in state taxes, you qualify for the new, higher SALT cap ($40K).

You’re in a beneficial position to benefit from the full SALT deduction in 2025. However, if you earn above $500K, the benefit starts phasing out.

4. Business owners using PTET workarounds are eligible for entity-level deductions beyond SALT

If you own an LLC or an S Corp, there’s a workaround that some states allow. Instead of paying state income tax as an individual, your business pays it.

Here’s how it makes a difference

As an individual paying personal tax, you are limited to a $40,000 deduction. However, your business can deduct the entire amount without a cap.

Additionally, you get a credit on your state taxes, so you’re not double-taxed

This is known as the Pass-Through Entity Tax (PTET) workaround—and it’s a significant tax break for eligible business owners.

Who cannot benefit from the SALT deduction?

• Standard deduction filers can’t claim SALT.
• Individuals with AGI over $500k have a phase-out of the expanded cap, up to the old $10k limit.
• If the total of your itemized deductions doesn’t exceed the standard deduction, the SALT deduction isn’t valid.

Practical example of an instance where SALT deduction is applied

Let’s assume a straightforward scenario of an individual who’d benefit from the SALT deduction.

An individual taxpayer in New York (2025) whose tax profile is as represented below:

Filing status: Married Filing Jointly

Gross income: $250,000

State and local taxes paid:

State income tax: $16,000

Property tax: $9,000

Local (NYC) tax: $3,000

Total SALT paid: $28,000

Other itemized deductions: $7,000

Standard deduction for married individuals filing jointly: $29,200

Possibility 1: SALT deduction without the cap

Itemized deductions:

SALT taxes: $28,000

Other itemized deductions: $7,000

Total itemized deductions: $35,000

Since $35,000 > $29,200 (standard deduction), they would itemize and deduct $35,000 from their taxable income.

Taxable income:
$250,000 − $35,000 = $215,000

Possibility 2: SALT deduction with the cap

SALT Cap: Limited to $10,000, no matter how much you paid.

Itemized deductions:

SALT taxes: $10,000 (capped)

Other deductions: $7,000

Total itemized deductions: $17,000

Now compare to the standard deduction ($29,200):

The standard deduction is higher, so the taxpayer is likely to take the standard deduction instead.

Taxable income:
$250,000 − $29,200 = $220,800

Takeaway

The SALT deduction is an option; it’s essential to weigh the benefits and choose to opt for the deduction if it reduces your taxable income. If the Standard Deduction is higher, then you don’t stand to gain from the SALT.

How can a tax professional assist me in claiming the SALT deduction benefits?

A qualified tax professional is invaluable in helping you maximize your SALT deduction while avoiding costly errors. Here’s how:

1. Identify Eligible Taxes for Deduction

A tax professional will determine whether to deduct state income tax or state sales tax, the option that gives you a higher deduction, and exclude non-deductible assessments.

2. Guide You on Itemizing vs. Standard Deduction

They will help you compare Standard Deduction and Itemized deductions, an essential part of the SALT deduction.

3. Avoid Overlapping or Double-Claiming

Several taxpayers mistakenly claim both sales and income tax, or deduct taxes reimbursed by an employer or other party.

A professional could ensure you’re compliant with IRS rules and don’t face penalties for improper deductions.

Incorrectly claiming state or local taxes is a red flag for IRS audits. A professional helps maintain accurate records of the necessary documentation, thereby minimizing audit risks.

4. Leverage SALT Workarounds for Business Owners

If you’re a business owner, a professional can elect the Pass-Through Entity Tax (PTET) in eligible states and coordinate federal and state returns to ensure full deduction without double taxation.

5. Track Legislative Changes

A tax expert stays updated on federal and state tax law to advise you on changing strategies before the laws change

6. State-Specific Expertise

There are variations in the state-by-state SALT rules. A professional maximizes credits, avoids deductions disallowed in certain jurisdictions, and could file multi-state returns for business owners or remote workers.

Conclusion

The SALT deduction has some windfall gains and some exasperating limitations. The rules vary depending on income, itemization, state-specific variations, and tax strategy. Hiring a tax professional not only helps you save big on taxes but also keeps your tax filing records audit-ready and keeps you free of possible penalties. Profitjets is a trusted tax filing, tax planning, and tax advisory service provider. We also provide outsourced accounting and bookkeeping, and expert CFO services. We have over 15 years of experience in the industry and have served more than 600 satisfied customers. Contact us to plan your taxes and maximize the SALT deduction.

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