3 Ways the SALT Deduction Increase Could Affect Your Taxes
10/03/2025
If you pay significant state income or property taxes, you know how quickly those bills can add up, and how limited the federal deduction has been in recent years. Since 2017, the State and Local Tax (SALT) deduction was capped at $10,000, leaving many families and business owners in high-tax states unable to fully deduct what they paid. That cap has now been raised, creating meaningful new opportunities for tax savings and long-term planning.
With the new legislation, the SALT cap has increased from $10,000 to $40,000, effective 2025 through 2029. That’s a substantial change, especially for dual-income or property-rich families living in states with steep income taxes. However, there’s an important caveat: the expanded deduction is only available to households with under $500,000 of income. That means careful planning is required to make sure you qualify.
Here are three ways this change may impact your finances:
The most immediate impact of the higher cap will be felt by families with large property tax obligations or those living in states with higher income tax rates. In addition, dual-income households or families with multiple properties may now see a meaningful reduction in their federal taxable income. If you fall below the income threshold, the increase could create new opportunities for cash flow management, charitable giving, or retirement contributions.
Example: A family paying $40,000 in combined state and property taxes could previously deduct only $10,000. With the higher cap, they may be able to deduct the full $40,000—if their income is under $500,000—potentially significantly reducing their federal tax bill.
Even before the SALT cap increase, some states introduced “workarounds” by allowing pass-through businesses (like S-corps and partnerships) to pay state income taxes at the entity level. These payments were deductible on the business return, bypassing the $10,000 cap on personal returns. With the cap now at $40,000 for qualifying households, combining entity-level planning with personal deductions can create more flexibility.
Example: An S-corp owner in a high-tax state may be able to strategically split taxes between the business and personal return to maximize deductions, as long as total household income remains below $500,000.
Property taxes often represent a significant annual expense for families with multiple properties or business holdings. Under the old $10,000 cap, most of that expense provided no federal deduction. The higher cap changes that. More deductibility means more cash flow, and that opens the door to more sophisticated planning moves.
Example: A dual-income family with real estate holdings could use the annual savings from the increased SALT deduction to fund wealth transfer strategies without straining cash flow.
The increase in the SALT deduction is encouraging, but it isn’t a guaranteed win. Without the right plan in place, you could still leave money on the table or, worse, structure things in a way that limits the benefit.
Tax changes like this ripple across your financial life, touching retirement income, investments, estate planning, and protection planning.
At Kaup’s Financial, we take all variables into consideration when we create your plan. If you’d like to see how to leverage the new SALT deduction rules to strengthen yours, let’s talk. Call us today at 402-924-3607 or book your free consultation here.
SALT Deduction Increase FAQ
With the new legislation, the SALT cap has increased from $10,000 to $40,000, effective 2025 through 2029. That’s a substantial change, especially for dual-income or property-rich families living in states with steep income taxes. However, there’s an important caveat: the expanded deduction is only available to households with under $500,000 of income. That means careful planning is required to make sure you qualify.
Here are three ways this change may impact your finances:
1. Bigger Deductions for High-Tax and Property-Rich Households
The most immediate impact of the higher cap will be felt by families with large property tax obligations or those living in states with higher income tax rates. In addition, dual-income households or families with multiple properties may now see a meaningful reduction in their federal taxable income. If you fall below the income threshold, the increase could create new opportunities for cash flow management, charitable giving, or retirement contributions.
Example: A family paying $40,000 in combined state and property taxes could previously deduct only $10,000. With the higher cap, they may be able to deduct the full $40,000—if their income is under $500,000—potentially significantly reducing their federal tax bill.
2. More Flexibility in Business Structures
Even before the SALT cap increase, some states introduced “workarounds” by allowing pass-through businesses (like S-corps and partnerships) to pay state income taxes at the entity level. These payments were deductible on the business return, bypassing the $10,000 cap on personal returns. With the cap now at $40,000 for qualifying households, combining entity-level planning with personal deductions can create more flexibility.
Example: An S-corp owner in a high-tax state may be able to strategically split taxes between the business and personal return to maximize deductions, as long as total household income remains below $500,000.
3. Opportunities for Legacy and Wealth Transfer Planning
Property taxes often represent a significant annual expense for families with multiple properties or business holdings. Under the old $10,000 cap, most of that expense provided no federal deduction. The higher cap changes that. More deductibility means more cash flow, and that opens the door to more sophisticated planning moves.
Example: A dual-income family with real estate holdings could use the annual savings from the increased SALT deduction to fund wealth transfer strategies without straining cash flow.
The Takeaway
The increase in the SALT deduction is encouraging, but it isn’t a guaranteed win. Without the right plan in place, you could still leave money on the table or, worse, structure things in a way that limits the benefit.
Tax changes like this ripple across your financial life, touching retirement income, investments, estate planning, and protection planning.
At Kaup’s Financial, we take all variables into consideration when we create your plan. If you’d like to see how to leverage the new SALT deduction rules to strengthen yours, let’s talk. Call us today at 402-924-3607 or book your free consultation here.