Major Changes to SALT Deductions Under the One Big Beautiful Bill

What just changed (and why you should care)

Homeowners, especially in high‑tax states, have reason to breathe easy again.

Under recent legislation (One Big Beautiful Bill), the cap on the State and Local Tax (SALT) deduction, which had been stuck at $10,000, has been raised to $40,000 for certain taxpayers.

This opens up new opportunities for property owners, but as always, the law has some caveats. The timing of moves, the structure of ownership, and state rules will make a huge difference in what you can actually accomplish.

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The upside: who gains the most

Here are some of the big winners and what the SALT change delivers:

Homeowners in high‑property‑tax areas

If you live in places where property taxes, or combined state & local taxes, are large, this change could translate into thousands more in deductible expenses.

Higher income taxpayers

Because itemizing deductions makes more sense when you have larger deductions. With a higher SALT cap, more people will get over the standard deduction threshold, making itemizing worthwhile.

Those with S corporations or other flexible business structures

There’s often a workaround via paying certain state income taxes at the entity level (if your state allows it), which can boost the deductible amount that flows through to your individual return.

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The risks & catches: What still limits you

As always, more deduction room doesn’t equal a free pass. These are some of the risks, limitations, and fine print you need to watch:

1. Duration of the change

   The increased cap isn’t necessarily permanent. Depending on future legislation, it could revert or otherwise be modified. So any strategic moves should factor in what might happen if the rules flip back.

   
   

2. State‑level rules matter

   Not all states recognize the entity‑level SALT workaround or similar strategies. The state’s statutes can limit the benefit or even make some strategies unavailable.

   
   

3. AMT and other federal limits

   Even with a higher SALT cap, you might still run into issues with the Alternative Minimum Tax (AMT) or other federal rules. For some homeowners, those will chew away some of the gains.

   
   

4. Standard deduction vs. itemizing

   If your other deductions (mortgage interest, charitable giving, other state & local property/income taxes) don’t push you past the standard deduction, you may not see much benefit at all.

   
   

5. Cash flow / required prepayment

   Some strategies require that you prepay state taxes or make payments through your S corp or LLC before year‑end to lock in the benefit. If you don’t act within the required periods, you may miss out.

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What to do now

Practical steps for homeowners to take as soon as possible so you don’t leave money on the table:

Action	Why It’s Important	Deadline / Tips
Review your 2025 estimated state & local tax payments	If you anticipate high state income or property taxes, prepayments may maximize deduction.	Make sure any payments are made before year‑end and properly documented.
Check your entity structure	If you own real estate via an S corp or LLC, and your state allows it, consider prepaying state income taxes through the entity to use the workaround.	Consult your CPA or tax attorney—some states require specific filings or conditions.
Recalculate whether itemizing makes sense	With the higher SALT cap, some homeowners will now cross the threshold where itemizing yields more benefit than taking the standard deduction.	Run projections both ways; don’t assume itemizing is worth it.
Be aware of “refund risk” or clawbacks	If you prepay too much, or later get refunds or tax credits that reduce your state tax liability, the federal deduction may be reduced.	Keep careful records; talk to a tax pro about these interactions.
Plan for future rule changes	Since tax laws shift, build flexibility into your strategy—don’t overcommit assuming current rules hold forever.	Keep abreast of legislative developments and revisit strategy annually.

What this means for the bigger picture: national debt, fairness, & policy

From my vantage point, these changes are double‑edged:

• Fairness & distribution: Raising the SALT cap helps homeowners in high‑tax states, but it still mostly benefits those in higher income brackets who itemize. The lower and middle‑income homeowners who take the standard deduction might still see very little direct upside.

  
  

• Impact on national fiscal health: More generous deductions reduce tax revenue (holding other variables constant). Coupled with other tax breaks and spending, this kind of change can contribute to higher deficits if not offset elsewhere.

  
  

• Incentives & behavior: With more deduction room, there’s potential for certain behaviors (property acquisitions, higher property tax assessments, etc.) to be influenced. Also, states may reexamine how they tax or structure their property and local taxes based on what filers actually deduct.

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Make the law work for you

The law isn’t just about what can’t be done,

but what can be done... if you plan smart.

The raised SALT cap is a win for many homeowners, but only if you take the right steps. Don’t assume you’ll automatically benefit just because the cap went up. Get ahead of deadlines, make sure your state allows key workarounds, and don’t forget to measure the trade‑offs.

Talk to your tax advisor and ask for a case study for your state to see exactly how much more deduction you might get, and whether itemizing makes sense.

Drop your thoughts in the comments below!

If you want to chat, send me a message on X.

✌️ Take care -Rick