If you own a home and live in a high-tax state like California or New York, you've probably bumped into the infamous $10,000 SALT cap—a limitation that’s quietly raised tax bills for millions of homeowners over the past several years.
Now, thanks to the 2025 tax law (part of the “One Big Beautiful Bill”), that cap has been dramatically increased. And it could mean major relief if you’ve been losing out on deductions you once counted on.
Here’s what’s changing—and what else you need to know as a homeowner or high-income earner.
1. SALT Cap Raised to $40,000
Yes, you read that right. The cap on state and local tax deductions has increased from $10,000 to $40,000.
This expanded deduction applies if:
- Your income is under $500,000 (Married Filing Jointly)
- Or under $250,000 (all other filing statuses)
If your income exceeds those thresholds, the deduction may begin to phase down—meaning the benefit is gradually reduced as income rises.
For many homeowners, especially in states with high property taxes and state income taxes, this change could result in a much lower federal tax bill.
2. Remote Work and State Tax Rules Still Complicated
The SALT deduction is helpful—but if you're working remotely, traveling frequently, or splitting time between multiple states, things get murky fast.
Some states may attempt to tax you even if you’re only physically present for a day or two. And many are getting more aggressive in asserting residency claims or nexus connections for tax purposes.
If you’re working in one state and getting paid from another—or if you're splitting time between states—it’s essential to address multi-state tax exposure proactively.
Bring this up during your tax planning session so we can evaluate whether state tax issues might affect your return.
3. High-Income Taxpayers Face Growing IRS Scrutiny
While audit rates for high earners remain relatively low compared to historical levels, the IRS is investing heavily in AI-driven enforcement tools and enhanced data matching.
Translation? The IRS is getting better at finding discrepancies—and faster at flagging high-income returns.
If your income is above the SALT deduction threshold, or you claim large itemized deductions, this is the year to be proactive, not reactive.
Smart Planning = Bigger Deductions + Lower Risk
The 2025 changes open the door for big wins—but they also demand thoughtful strategy, especially for homeowners with multiple deductions or multi-state complexity.
If you’re a high-income earner or property owner who wants to make the most of the new rules—while staying off the IRS radar—let’s get a smart plan in place now.
Email me at kim@kimberlybagleycpa.com or book a call with me here and let’s make sure your tax plan is working as hard as you do.