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Tax Byte

Time to Review Tax Planning: The One, Big, Beautiful Bill Act Raises the SALT Limit

Karen Brosi, CFP, EA

The One, Big, Beautiful Bill Act (OBBBA) enacted in July 2025 raises the federal SALT (state and local tax) deduction limit from $10,000 to $40,000 through 2029, offering significant tax relief for residents of high-property-tax states. This change coincides with a slight increase in the now-permanent TCJA standard deduction ($15,750 for single filers and $31,500 for joint filers) encouraging many taxpayers to reassess whether itemizing deductions is beneficial. However, the enhanced SALT limit begins phasing out (never lower than $10,000) at a modified adjusted gross income (MAGI) of $500,000 and is scheduled to revert to $10,000 in 2030.

Filing Status Note

The $40,000 upper limit and $10,000 lower limit are the same for all filing statuses except married filing separate (MFS), where the limits are half – $20,000 and $5,000. The MAGI phase out is also the same for all filing statuses, except the MFS phase out begins at $250,000.

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Who Benefits Most?

The taxpayers who will benefit most are middle and upper-middle-income homeowners in high-tax states such as New Jersey, New York, California, and Connecticut. Notably, around 20% or more of properties in these states pay annual property taxes exceeding $10,000. In the top 2 metro areas nationwide (in CA and NY-NJ), almost 50% of homeowners pay more than $10,000 in property taxes. However, it isn’t clear how many of these homes are owned by high-income earners near or above the $600,000 MAGI threshold who may see limited benefit due to the phaseout.

Top 10 States with Highest Share of Properties Taxed Over $10,000
NJ	39.90%
NY	25.90%
CT	19.40%
CA	19.30%
MA	18.40%
NH	16.30%
DC	15.60%
IL	13.70%
TX	12.40%
RI	9.30%

Top 10 Metros with Highest Share of Properties Taxed Over $10,000
San Jose-Sunnyvale-Santa Clara, CA	47.90%
New York-Newark-Jersey City, NY-NJ	47.80%
San Francisco-Oakland-Fremont, CA	40.90%
Bridgeport-Stamford-Danbury, CT	39.30%
Kiryas Joel-Poughkeepsie-Newburgh, NY	37.50%
Trenton-Princeton, NJ	35.80%
Nantucket, MA	35.50%
Austin-Round Rock-San Marcos, TX	32.00%
Jackson, WY-ID	28.70%
Santa Cruz-Watsonville, CA	28.10%

Tax Planning Ideas

Professionals should revisit itemization strategies with clients, especially those in high-tax areas or whose SALT payments now exceed the standard deduction.

Bundle charitable donations
Capture medical expenses
Accelerate other deductible expenses

In addition, consider deferring income, managing capital gains, delaying Roth conversions, or shifting bonuses to remain under the phaseout threshold. Documentation and record-keeping will be crucial.

All phaseouts create higher effective tax rates within the phaseout range. During the SALT deduction phaseout (occurring between $500,000 and $600,000 of income), the effective tax rate increases from 35% to 45.5%. This happens because each additional dollar of income is not only taxed at the marginal rate, but also triggers the loss of $0.30 in SALT deduction benefits, creating a compounding tax effect.