Hello Everyone –

We hope you are having a wonderful Fall Season. As we transition into winter and get closer to the end of the year, we would like to continue to share with you the many recent changes to the tax code and how these changes may impact your tax situation.

Under President Trump’s One Big Beautiful Bill, one of the more talked about tax provisions is the change in the federal deduction for state and local taxes (SALT) — i.e., taxes paid to your state or local government (income, sales, property). These changes make it easier for many taxpayers who live in states with high income tax rates or high property taxes, to itemize their deductions on their 2025 tax return for greater tax relief.

Federal deduction for state and local taxes (SALT) – Taxpayers who itemize only:

• For tax year 2025: the deduction cap is raised to $40,000 for most taxpayers from a previous cap of $10,000.
  1. Please note this only applies to those who itemize to claim the SALT deduction. Standard deduction
  filers cannot use this deduction.
• Law prior to 2025: max deduction is $10k
• Law as of 1/1/2025:
  1. Total income under $500k ($250k if filing separately): Max deduction is $40k
  2. Total income between $500k – $600k: Max deduction is between $10k – $40k
  3. Total income over $600k ($300k if filing separately): Max deduction is $10k
• The changes in SALT deductions are in effect for the next five years.
  1. From 2026-2029 the cap increases about 1% per year (Thus a ~$40,400 cap in 2026 and up to a ~$42,000
  cap in 2029).
  2. In 2030, the deduction cap reverts back to the $10,000 SALT limit unless future legislature is passed in
  Congress to continue these key changes.
• State level “PTET” (pass-through entity tax) workarounds remain relevant under the new law (the deduction boost doesn’t eliminate them).

There are additional tax law changes that have taken effect, and we will continue to highlight a few more prior to this upcoming filing season. If you prefer a one-on-one call or yearend projection to discuss these items and how they impact your 2025 taxes, please reach out to your account manager or Info@HSTaxCPAs.com to setup a consultation.

2024 Tax Returns & Earlier Years: 

For those that have not filed their taxes in 2024 or have prior years to file, the e-file window closes at the end of the month so we will want to finalize all returns as soon as possible.

Thank you very much!