Introduction
One of the most debated parts of the U.S. tax code is the SALT deduction the ability to deduct state and local taxes (SALT) on your federal tax return. Under the 2017 Tax Cuts and Jobs Act (TCJA), SALT deductions were capped at $10,000, hitting residents of high-tax states the hardest.
Trump’s 2025 tax proposal aims to double the cap to $20,000 for married filers, restoring a significant benefit to homeowners and professionals in states like California, New York, and New Jersey.
In this blog, we’ll break down the proposed SALT deduction changes, IRS code references, examples, and steps you should take to maximize this opportunity.
What Is the SALT Deduction?
The SALT deduction allows taxpayers who itemize to deduct these taxes from their federal income:
- State income taxes
- Local income taxes
- Property taxes
- Sales taxes (in place of income taxes, if elected)
Proposed Changes to SALT (IRC References)
- IRC §164(b)(6) – Currently caps SALT deductions at $10,000
- 2025 Proposal – Amends §164 to increase the deduction cap to:
- $20,000 for Married Filing Jointly
- $10,000 for Single Filers (unchanged)
This change would apply only to taxpayers who itemize, not those taking the standard deduction.
Who Benefits the Most?
You’re most likely to benefit if:
- You live in high-tax states (CA, NY, NJ, IL, CT, MA)
- You pay over $10,000 in combined property and income taxes
- You itemize deductions instead of claiming the standard deduction
- You are married filing jointly (higher cap applies)
IRS Forms to Track
- Form 1040 Schedule A – Used to claim SALT deductions
- Form W-4 – May need to be updated if your tax liability changes
- Form 6251 – For calculating AMT (Alternative Minimum Tax), which may impact high-income filers
Example Scenario
Case: Kabir & Nisha – Married, Homeowners in New Jersey
- State income tax paid: $12,000
- Property tax paid: $10,000
- Total SALT paid: $22,000
2024 deduction allowed: $10,000
2025 proposal allows: $20,000
Increased deduction: $10,000
Federal tax savings (at 24% rate): $2,400
Step-by-Step Compliance Strategy
- Add Up 2024 State and Local Taxes – Include property, income, and sales taxes
- Itemize or Standard Deduction? – If your itemized total exceeds the new standard deduction, SALT may now benefit you
- Update Your Withholding – Use the IRS Withholding Estimator to adjust Form W-4
- Coordinate With Mortgage & Local Taxes – Consider prepaying property taxes
- File Using Schedule A – Only itemizers can claim the new cap
- Consult a CPA – To avoid triggering AMT and to optimize deduction stacking
Conclusion
The SALT deduction expansion under Trump’s 2025 tax bill reopens a powerful planning tool especially for residents in high-tax states. If you’ve been stuck taking the standard deduction due to the old $10,000 cap, now is the time to re-evaluate. With the right strategy, your household could save thousands in federal taxes.
Call to Action
Are you taking full advantage of SALT deductions in 2025?
With the cap potentially doubling, many homeowners and professionals in high-tax states can reclaim valuable deductions. But these benefits only apply if you itemize and file correctly.
Schedule a meeting with Anshul Goyal, CPA, EA, FCA
About Our CPA
Anshul Goyal, CPA, EA, FCA, is a U.S.-licensed Certified Public Accountant and Enrolled Agent with advanced knowledge of federal deduction rules and state-specific tax optimization. He assists clients in California, New York, New Jersey, and other high-tax states in leveraging deductions and credits under changing tax laws.
Disclaimer
This blog is for informational purposes only and does not constitute legal, financial, or tax advice. SALT deduction limits and AMT rules vary by taxpayer profile. Please consult a licensed CPA before filing.