A Break For Taxpayers: What The New SALT Cap Could Mean For You

By: Jack Strulowitz

By Jack Strulowitz

This spring, Congress quietly passed one of the most meaningful pieces of tax relief for upper–middle–income families in years: a major expansion of the federal deduction for state and local taxes. For many New Yorkers, it represents a long-awaited correction to a rule that had penalized residents of high-tax states since 2017.

When the original $10,000 SALT deduction cap was enacted under the Tax Cuts and Jobs Act, millions of homeowners in states like New York, New Jersey, and California saw their federal deductions slashed overnight. The new legislation, effective for 2025, lifts that cap to $40,000 for married couples filing jointly (and $20,000 for single filers). The expanded limit begins to phase out for households earning more than $500,000, reverting to the original $10,000 cap once income reaches $600,000 (Internal Revenue Service, 2025).

The original $10,000 limit was introduced in 2017 as part of a broader federal tax overhaul aimed at offsetting the cost of lower income-tax rates. Lawmakers argued that the deduction disproportionately benefited wealthier taxpayers in high-tax states. The impact, however, was far-reaching. Middle- and upper-middle-income families who owned homes or paid significant state taxes lost thousands of dollars in annual deductions.

The result was especially acute in regions like the New York suburbs, where even modest homes carry property-tax bills exceeding $20,000. Since 2017, many of those families have been effectively taxed twice on the same income: once by their state and again by the federal government, without the relief that existed for decades prior (Congressional Research Service, 2023).

Under the new law, a family paying $35,000 in combined state, local, and property taxes can now deduct nearly that entire amount instead of being limited to $10,000. For a household in the 24% federal bracket, that translates to roughly $6,000 in annual savings. For those in the 32% bracket, the same deduction could yield savings closer to $8,000.

It is a substantial difference, one that can effectively offset a month or two of mortgage payments, yeshiva tuition, or a year’s worth of college savings contributions.

The biggest winners are upper-middle-income families earning between $250,000 and $500,000, especially homeowners who itemize deductions. Those above $600,000 in income will see their benefit fade due to the phase-out, but even they may be able to take advantage in years when income dips due to bonuses, capital-gain timing, or business fluctuations.

To illustrate, one of my clients, a physician in Woodmere, paid about $30,000 in property taxes and another $35,000 in New York State income taxes last year, bringing their total state and local tax bill to roughly $65,000. Under the old cap, they could deduct only $10,000 of that amount. Under the new rules, they can now deduct up to $40,000, lowering their taxable income by an additional $30,000 and reducing their federal tax bill by roughly $9,000 in 2025. For families like this, the change offers meaningful relief and a more accurate reflection of the real cost of living in high-tax communities.

Because the expanded SALT deduction is income-based, timing matters. Taxpayers near the $500,000 threshold may want to explore income-smoothing strategies to stay within the full benefit range. That could mean deferring income, adjusting bonus payments, or accelerating deductible expenses such as charitable gifts, property-tax payments, or state estimated payments into lower-income years.

Business owners can also consider coordinating the SALT deduction with pass-through entity tax (PTET) elections, which allow state taxes on business income to be paid at the entity level and deducted without regard to the federal cap. The interaction between PTET elections and the new limits will vary by state, but for many clients, combining both can produce meaningful savings (Internal Revenue Service, Notice 2020-75).

The expanded SALT cap is temporary, set to expire after 2029 unless Congress extends it. That means the next five tax years represent a unique planning window. For many families, the best approach will be to maximize the deduction while it is available, but not rely on it as a permanent fixture of their tax strategy.

This uncertainty underscores the importance of coordination between tax and investment planning. Families with large taxable portfolios, for example, might strategically realize capital gains in years when the higher deduction offsets part of the additional tax. Similarly, retirees drawing from IRAs can time their withdrawals to remain within income thresholds that preserve the full SALT benefit (Internal Revenue Service, 2025).

According to data from the Tax Policy Center, the average SALT deduction among New York filers before the 2017 cap exceeded $21,000. After the cap, that figure fell below $9,000. With the new rules, many will regain at least part of that lost deduction. The Congressional Budget Office estimates that the change could reduce federal tax liabilities by roughly $50 billion over the next five years, concentrated in high-cost coastal states (Tax Policy Center, 2025; Congressional Budget Office, 2025).

Beyond the numbers, the policy shift reflects a broader recalibration of federal tax fairness. While the debate over whether the deduction favors high earners will continue, the reality for many households is simple: restoring deductibility for state and local taxes feels like a return to balance.

The new SALT cap will not erase the gap between high- and low-tax states, but it will give millions of families meaningful breathing room. For those who itemize, the combination of higher limits, strategic timing, and coordinated planning can translate into thousands of dollars in annual savings.

Taxes shape more than spreadsheets. They influence where families live, give, and invest. For now, the window is open. With thoughtful guidance and proactive planning, taxpayers can make the most of these next few years before the rules shift again. n

Jack Strulowitz is a Financial Advisor at Bernath & Rosenberg in Cedarhurst, NY, where he helps high–net-worth individuals and families with retirement, tax, and estate planning. For questions or to schedule a consultation, contact [email protected] or 847-962-3352.

This material is for general information and educational purposes only and is not intended to provide specific advice or recommendations for any individual. Consult your tax or legal advisor before making decisions.

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