The One Big Beautiful Bill Act, signed into law July 4, 2025, raises the state and local tax (SALT) deduction cap from $10,000 to $40,000 for households with modified adjusted gross income (MAGI) under $500,000. For many, this brings a...
The One Big Beautiful Bill Act, signed into law July 4, 2025, raises the state and local tax (SALT) deduction cap from $10,000 to $40,000 for households with modified adjusted gross income (MAGI) under $500,000. For many, this brings a renewed incentive to itemize, putting mortgage interest, charitable contributions, and property taxes back into play.
The expanded deduction is most favorable below $500,000. It can also benefit those earning above that level with planning. In the $500,000 to $600,000 band, the deduction gradually shrinks toward a minimum deduction of $10,000, sometimes producing a sharper-than-expected rise in effective tax rates. AAFCPAs advises that clients in this range who can manage income and deductions—such as business owners timing bonuses or individuals considering Roth IRA conversions—plan proactively. Small adjustments that keep MAGI under $500,000 this year may preserve more of the benefit.
The $40,000 cap applies to the combined total of state income and real estate taxes. For example, a household paying $25,000 in state taxes and $15,000 in property taxes can now deduct the full amount, where previously only $10,000 could be deducted. That extra deduction can also give other itemized deductions, such as charitable giving and mortgage interest, more impact.
AAFCPAs’ Individual & Family Tax practice works with high net worth clients looking to make the most of their financial opportunities while keeping long-term goals in sight. We bring together a team of tax advisors, wealth managers, and estate planning attorneys to design strategies that fit each client’s complex financial picture. That includes preserving and growing wealth, coordinating estate planning and succession, managing international tax matters, and minimizing taxes through legal deductions, credits, and exemptions. We also help clients optimize charitable giving, protect assets, and navigate family dynamics in wealth transfer, creating a coordinated plan that balances efficiency, security, and legacy.
These insights were contributed by Keith Kenez, CPA, MBA, MSA, Tax Manager.
Questions? Reach out to our author directly or your AAFCPAs partner.
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