Why SALT Matters More Than Ever
If you own a business, file a joint return, or simply live in a high-tax state, the SALT Act has probably affected your tax bill more than you realize. State and local tax deductions can play a major role in how much you ultimately owe the IRS, yet recent legislation has made this area of tax law increasingly complex.
With proposed SALT Act changes tied to the Big Beautiful Bill Act, many taxpayers are wondering what this means for their finances, their planning strategies, and their compliance obligations going forward.
At Powell Tax Law, we help individuals and business owners navigate complicated tax changes like these every day. Our team works directly with clients to resolve IRS issues, reduce tax burdens, and create smart strategies that adapt to shifting tax laws. Understanding the SALT Act updates is an important step in protecting your financial future.
The SALT Act refers to rules governing how much taxpayers can deduct for state and local taxes paid. This typically includes state income taxes, property taxes, and certain local taxes. For years, these deductions provided meaningful relief, especially for taxpayers in states with higher tax rates.
However, the SALT deduction cap, currently $40,000, placed a firm limit on how much could be deducted at the federal level. That cap has been a major pain point for business owners, high-earning individuals, and households with significant property tax obligations.
Why the Cap Matters:
When deductions are limited, taxable income rises. That often means a higher federal tax bill, even when taxpayers are already paying substantial state and local taxes. For many families and businesses, this has disrupted long-standing tax planning strategies.
Did You Know? According to the Tax Foundation, high-income and high-tax location individuals were impacted by the SALT deduction cap the most. The Tax Cuts and Jobs Act capped the federal deduction for state and local taxes at $10,000 from 2018 through 2025. At the same time, it doubled the standard deduction, which reduced the number of taxpayers who benefit from itemizing their deductions.
The Big Beautiful Bill Act brings renewed attention to this issue by proposing changes that could adjust, expand, or restructure how SALT deductions are handled.
The Big Beautiful Bill Act includes provisions aimed at modifying how SALT deductions apply going forward. While the exact implementation details may continue to evolve, the intent is to address concerns that the existing cap disproportionately affects certain taxpayers.
Proposed SALT-related changes may include:
For business owners, these changes could influence decisions around entity structure, estimated tax payments, and long-term planning. For individuals, especially those with higher incomes or significant property holdings, even modest adjustments to the SALT framework can translate into meaningful savings.
Did You Know? As the standard deduction increased, many taxpayers no longer benefited from claiming smaller sales tax deductions. IRS data shows that while overall state and local sales tax deductions declined between 2017 and 2022, the remaining benefits are now concentrated among higher-income households, particularly those earning over $100,000 and taxpayers in states without income taxes or those claiming large one-time purchases like vehicles, property, or major renovations.
With potential SALT Act changes on the horizon, the most important thing taxpayers can do is prepare. Waiting until after filing season often limits available options.
Steps to Consider:
Smooth transitions in tax law require proactive planning. The earlier you evaluate your exposure and opportunities, the more flexibility you retain.
At Powell Tax Law, we routinely help clients identify ways to reduce risk, resolve IRS challenges, and adapt strategies when tax laws shift. SALT Act changes are no exception.
The SALT Act and the Big Beautiful Bill Act highlight how quickly tax rules can change and how deeply those changes can affect individuals and businesses alike. While uncertainty can be frustrating, it also creates opportunities for smarter planning and meaningful tax savings.
By understanding the proposed changes, staying informed, and working with experienced tax professionals, taxpayers can make confident decisions instead of reactive ones.
Ready to see how the SALT Act changes could affect you?
Contact Powell Tax Law to review your situation, explore your options, and take control of your tax strategy before new rules take effect.