Introduction
One of the most talked-about provisions in Donald Trump’s 2025 tax proposal is the proposed increase to the SALT deduction cap a move that could significantly benefit taxpayers in high-tax states like California, New York, and New Jersey. The SALT (State and Local Tax) deduction limit was originally capped at $10,000 under the Tax Cuts and Jobs Act (TCJA) of 2017, leading to reduced deductions for millions of households.
Trump’s new bill aims to double the cap to $20,000 for joint filers, providing major relief to those who itemize. This blog explores what this change means, who benefits most, how to plan around it, and what IRS codes and forms are involved.
What Is the SALT Deduction?
The SALT deduction allows taxpayers who itemize to deduct certain state and local taxes paid from their federal taxable income, including:
- State income taxes
- Local income taxes
- Property taxes
- Sales taxes (if elected in lieu of income taxes)
Proposed 2025 Changes to SALT (IRC & Legislation Reference)
- IRC §164(b)(6) – The provision that originally capped SALT deductions at $10,000
- Trump’s 2025 Bill Proposal – Amends §164 to increase the cap to $20,000 for joint filers and $10,000 for single filers
- No phaseout has been proposed yet, but thresholds may apply depending on income level
Who Benefits from the Higher SALT Cap?
Taxpayers who:
- Own property in high-tax states (CA, NY, NJ, IL, CT, MA)
- Earn over $100,000+ annually
- Have significant state income and/or property tax payments
- Already itemize deductions instead of taking the standard deduction
- Are married filing jointly and maxed out the previous $10,000 cap
IRS Forms Impacted
- Form 1040 Schedule A – Where SALT deductions are itemized
- Form W-4 – May need updating if take-home income changes due to higher deductions
- Form 6251 – May affect AMT calculation if deduction limit changes influence taxable income
Example Scenario
Case: Raj & Meena, Married Couple in California
- Annual income: $240,000
- State income tax paid: $16,000
- Property tax: $11,000
- Total SALT eligible taxes: $27,000
Pre-2025 Cap: $10,000 deductible
Post-2025 Proposal: $20,000 deductible
Net increase in deduction: $10,000
Federal tax saved (assuming 24% marginal rate): $2,400
Step-by-Step IRS Compliance Guide
- Review Your 2024 Return – Check if you itemized or took the standard deduction
- Recalculate 2025 Deductions – Project itemized deductions using new SALT limits
- Track Your Property & State Income Tax Payments – These will now have higher deductibility
- Update Form W-4 if Necessary – Adjust federal withholding to match increased deductions
- Compare Filing Status – Joint filers benefit more; evaluate filing strategy if applicable
- Consult a CPA for AMT Risks – Higher deductions may trigger or avoid Alternative Minimum Tax
Conclusion
The proposed increase to the SALT deduction cap is a targeted tax relief measure aimed at residents in high-tax jurisdictions. While it won’t affect all taxpayers equally, for millions of households that itemize, this change could restore significant federal deductions lost since 2017. Proactive planning will ensure you maximize this opportunity and avoid compliance missteps.
Call to Action
Will the new SALT deduction cap save you thousands in federal taxes?
If you live in a high-tax state or pay significant property and income taxes, Trump’s 2025 proposal could lower your effective federal tax rate but only if you itemize correctly and structure your deductions well.
Schedule a personalized consultation now:
Book 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 authorized to represent clients before the IRS. He specializes in IRS compliance, international taxation, and advanced tax planning for Indian residents and U.S.-based business owners.
Disclaimer
This blog is for informational purposes only and does not constitute legal, financial, or tax advice. Please consult a licensed professional before acting on any tax information. IRS rules may change, and applicability depends on individual facts.