What to know about the new (higher) SALT deduction — and how to claim it

Core Insights - The SALT deduction cap for the 2025 tax year increases to $40,000 from the previous $10,000 limit, benefiting homeowners in high-tax states [1][19] - The SALT deduction allows taxpayers to deduct various non-federal taxes, but only if they itemize their deductions [2][10] SALT Deduction Overview - The SALT deduction includes state and local income taxes, property taxes, local taxes, and optional sales taxes [5][18] - Homeowners must itemize to claim the SALT deduction, which may not be beneficial for those who would benefit more from the standard deduction [8][9] Changes and Implications - The SALT cap was previously set at $10,000 from 2018 to 2025, limiting benefits for many taxpayers [4][7] - The increase to $40,000 allows homeowners to deduct more, potentially translating to significant tax savings, especially for those in higher tax brackets [8][12] Phase-Out for High-Income Earners - A phase-out for high-income earners begins at $500,000, reducing the deduction for those above this threshold but not eliminating it entirely [12][13] - Households earning $400,000 to $500,000 are expected to see the largest relative reductions in their federal tax bills [11] Claiming the SALT Deduction - Taxpayers need to total their property taxes, state income (or sales) taxes, and personal property taxes on Schedule A to claim the deduction [14] - The IRS Sales Tax Deduction Calculator can assist those in states without income tax in estimating their deduction [15] Future of the SALT Cap - The expanded $40,000 cap is set to remain through the 2029 tax year, with annual inflation adjustments, but is scheduled to revert to $10,000 in 2030 unless legislative action is taken [19]