2025 SALT Cap Changes: What to Know Before You File in 2026

The passage of the One Big Beautiful Bill introduces meaningful changes to the federal tax landscape—and one of the most impactful updates for individual taxpayers is the adjustment to the State and Local Tax (SALT) deduction cap.

While many people are hearing about these changes during the 2026 tax filing season, it’s important to clarify when the new rules actually apply. The SALT cap expansion applies to the 2025 tax year, meaning taxpayers will first see the impact when they file their 2025 returns in 2026.

For a broader overview of how the bill affects individual finances, you can read CJBS’s full breakdown here. 

Below, we focus specifically on what’s changing with SALT and how it could affect tax planning decisions beginning in the 2025 tax year.

What Is the SALT Deduction?

The State and Local Tax (SALT) deduction allows taxpayers who itemize deductions to reduce their federal taxable income by deducting certain taxes paid to state and local governments during the year. These typically include:

• State and local income taxes (or sales taxes, if elected)
• Real estate property taxes
• Personal property taxes

Prior to 2018, taxpayers who itemized were generally able to deduct the full amount of eligible state and local taxes paid. For many households—particularly homeowners and higher earners in states with high tax rates or significant property taxes—this deduction played a meaningful role in reducing overall federal tax liability.

That changed when the SALT deduction was capped at $10,000 beginning in 2018.

Under the cap, taxpayers may pay tens of thousands of dollars each year in state income and property taxes but are limited to deducting only $10,000 on their federal return. Any taxes paid above that amount received no federal tax benefit, which effectively increased a taxpayer’s overall tax burden.

This limitation has been especially impactful for taxpayers in higher-tax states, where income and property taxes often exceed the cap. It has also reduced the value of itemizing for some households, particularly when combined with the higher standard deduction. This made the SALT deduction far less effective than it once was. During this time, many states enacted pass-through entity taxation for business owners and entities, to work around this impact.

What Changed Under the One Big Beautiful Bill?

Beginning with the 2025 tax year (returns filed in 2026), the One Big Beautiful Bill temporarily expands the State and Local Tax deduction:

• The SALT deduction cap increases to $40,000
• The cap is $20,000 for married taxpayers filing separately
• The expanded cap begins to phase out once modified adjusted gross income exceeds $500,000
• The higher cap applies to tax years 2025 through 2029, unless extended by future legislation

For tax years prior to 2025, the $10,000 SALT cap remains in effect.

Why the SALT Cap Increase Matters

Larger Deductions for Itemizing Taxpayers

Taxpayers who itemize and pay significant state income or property taxes may now be able to deduct a much larger portion of those payments at the federal level, which can result in a meaningful reduction in taxable income for eligible households.

Strategic Planning Has a Limited Window

Because the higher SALT cap is temporary, timing matters. Tax planning opportunities may include:

• Evaluating the timing of state estimated tax payments
• Coordinating property tax payments within eligible years
• Managing income levels to stay below phase-out thresholds

These decisions must be made during the tax year itself, not after filing season begins.

Income Levels Affect the Benefit

Higher-earning taxpayers should be aware that the expanded SALT cap begins to phase out once income exceeds $500,000. Understanding how income fluctuations affect eligibility is an important part of proactive planning.

SALT Is Part of a Broader Tax Shift

The SALT cap increase is one component of a broader set of individual tax changes introduced under the One Big Beautiful Bill, including adjustments to deductions, credits, and long-term planning considerations.

For a comprehensive look at how these changes may affect your financial picture, visit CJBS’s full overview.

Key Takeaways

• The expanded SALT deduction applies to the 2025–2029 tax years
• Taxpayers will first see the impact when filing 2025 returns in 2026
• Itemizing taxpayers in higher-tax states stand to benefit the most
• Income thresholds and sunset provisions make early planning essential

How CJBS Can Help

Tax planning is not a one-size-fits-all exercise. It requires evaluating income, deductions, timing, and long-term financial goals within the context of evolving tax law.

CJBS works closely with individuals and business owners to help them understand how legislative changes affect their overall tax strategy—not just one line item on a return.

If you’d like guidance on how the SALT cap changes apply to your situation, our team is here to help you plan with clarity and confidence.