Trump’s ‘SALT torpedo’ could deal a massive tax blow worth thousands to America’s high earners. Here’s how to avoid it

Core Points - The new SALT deduction limit has increased from $10,000 to $40,000, with a gradual annual increase until 2029, reverting to $10,000 in 2030, and phasing out for adjusted gross incomes over $500,000 [2][3] - Households with incomes between $500,000 and $600,000 may experience a significant tax burden due to the phaseout, leading to an effective tax rate increase of up to 30% [3][4] - The effective tax rate for incomes above the $500,000 limit could reach as high as 45.5% due to the SALT deduction changes [4] Tax Strategies - High-net-worth investors can mitigate the impact of the SALT torpedo by keeping their taxable income below the $500,000 threshold [5] - Strategies to reduce taxable income include avoiding mutual funds in favor of tax-efficient ETFs, which typically do not distribute year-end capital gains [6] - Investing in commercial real estate can provide tax efficiencies through 1031 exchanges, allowing deferral of capital gains taxes when reinvesting [7]