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SALT Deduction Cap Increase: What High-Earning Women Need to Know Before 2030 · The Wealth Cafe

• 0:15
  SPEAKER_00: Welcome back to another episode of the Wealth Cafe.
• 0:17
  SPEAKER_00: As always, I am Caroline Tannis, lead financial advisor and founder of Tannis Financial Group.
• 0:23
  SPEAKER_00: Let me tell you something that happened a lot during the year 2018.
• 0:28
  SPEAKER_00: High-earning women and their families across New York, New Jersey, California, they sat down with their accountants to do their taxes for the first time under a new set of rules.
• 0:40
  SPEAKER_00: A lot of them were blindsided.
• 0:41
  SPEAKER_00: Women and their families who had been deducting 30,000, 40,000, in some cases even 50,000 in state and local taxes every year suddenly discovered that their deductions had been capped at$10,000, no exceptions.
• 0:56
  SPEAKER_00: There was no phase-in.
• 0:58
  SPEAKER_00: The tax jobs cuts in act of 2017 had quietly handed high earners and high tax states one of the largest effective federal tax increases in decades.
• 1:09
  SPEAKER_00: And most people didn't fully realize it until they filed for eight years, eight tax years that$10,000 cap held.
• 1:18
  SPEAKER_00: And it didn't move.
• 1:19
  SPEAKER_00: It didn't adjust for inflation while property taxes continued to rise, while state income taxes went up, and while the salt burden for women and their families in this audience grew year over year, the federal deduction stayed at that 10 grand.
• 1:34
  SPEAKER_00: However, this has changed officially as of July 4th, 2025.
• 1:38
  SPEAKER_00: The One Big Beautiful Bill Act raised the salt deduction cap from 10,000 to 40,000 for 2026, effective across tax years 2025 through 2029.
• 1:50
  SPEAKER_00: Now, for many of the listeners in this audience, this is the single largest federal tax benefit that they have received in honestly nearly a decade.
• 1:58
  SPEAKER_00: But here is where the headlines missed.
• 2:01
  SPEAKER_00: That$40,400 cap is not available to everyone.
• 2:05
  SPEAKER_00: It actually phases out for high earners in a way that matters enormously if your income is near or above$500,000.
• 2:13
  SPEAKER_00: And that whole thing sunsets in 2030, meaning you have a window to benefit from this.
• 2:19
  SPEAKER_00: And that window, it's not unlimited.
• 2:21
  SPEAKER_00: Today I want to give you the full picture, not just the good news headline.
• 2:26
  SPEAKER_00: This is the complete story so you can actually use it before we, well, potentially lose it.
• 2:32
  SPEAKER_00: Let me give you the numbers clearly so you have them.
• 2:34
  SPEAKER_00: For 2026, the federal salt deduction cap is 40,400.
• 2:38
  SPEAKER_00: For most filers, that is, that is for individuals, married couples filing jointly, and head of households.
• 2:43
  SPEAKER_00: If you are married filing separately, however, it is 22,200.
• 2:49
  SPEAKER_00: The cap will increase by 1% per year through 2029.
• 2:53
  SPEAKER_00: So it will be approximately 40,804 in 2027 and so on.
• 2:58
  SPEAKER_00: But after 2029, it's reverting to that$10,000 unless Congress acts to extend it.
• 3:03
  SPEAKER_00: For a lot of the families that benefit and most of those with household incomes, roughly between$200,000 and$500,000 who itemize deductions and have significant state and local tax exposure.
• 3:15
  SPEAKER_00: This is a large portion of the listeners in this audience.
• 3:19
  SPEAKER_00: Now, if you own a home, for example, in New Jersey, where I live, where the average property taxes are around rates of 2.2 of assessed value, and you have a meaningful state income tax from salary, bonus, or investment income, your true salt bill may easily be$25,000 to$40,000 or even more.
• 3:38
  SPEAKER_00: Under the old rules, you could only deduct$10,000 of that.
• 3:42
  SPEAKER_00: Under the new rules, you may be able to deduct the full amount.
• 3:46
  SPEAKER_00: To put that in dollars, if your marginal federal tax rate is$24,000 and you now have$30,000 more in deductions, your federal tax bill drops by approximately$7,200.
• 3:59
  SPEAKER_00: That's real money.
• 3:59
  SPEAKER_00: That could be a vacation.
• 4:01
  SPEAKER_00: And it is money that has been unavailable for to you for eight years.
• 4:05
  SPEAKER_00: But this is critical and this only matters if you itemize.
• 4:09
  SPEAKER_00: The 2026 standard deduction for married couples filing jointly is actually$32,200.
• 4:15
  SPEAKER_00: And if your total itemized deductions, salt, your mortgage interest, plus any charitable contributions, plus other qualifying expenses don't exceed that$32,000, you are still better off.
• 4:28
  SPEAKER_00: Taking the standard deduction and the increased salt cap helps you honestly with nothing.
• 4:33
  SPEAKER_00: Run the numbers with your accountant before assuming that this benefit will apply to you.
• 4:39
  SPEAKER_00: This is the piece of the salt story that most news coverage got wrong or simply just glossed over.
• 4:45
  SPEAKER_00: And it is the piece that honestly matters most for most of the women that are listening in this audience.
• 4:51
  SPEAKER_00: The$40,400 cap, it's not available at all income levels.
• 4:55
  SPEAKER_00: It is phased out for taxpayers with a modified adjusted gross income above$50,500.
• 5:02
  SPEAKER_00: Now that phase out rate is 30 cents on every dollar of Magi above the threshold.
• 5:07
  SPEAKER_00: So the cap reduces it, but it never drops below$10,000, regardless of your income.
• 5:12
  SPEAKER_00: And the math works like this: the increased portion of the cap is$30,400.
• 5:17
  SPEAKER_00: That's the difference you're gonna see between$40,400 and the old$10,000 floor.
• 5:22
  SPEAKER_00: At a 30% phase out rate, the full benefit disappears after approximately$101,000 of income above that$505K, which is the threshold that we have.
• 5:33
  SPEAKER_00: That means at$606,000,$333,000 of Magi, your effective salt cap goes back to that$10,000, the same as it was before.
• 5:41
  SPEAKER_00: So who does this hit?
• 5:43
  SPEAKER_00: A woman who's earning$550,000 in 2026 from salary, bonus, RSU, investment income, it is squarely in the phase out zone.
• 5:52
  SPEAKER_00: And if you are receiving that partial benefit, not the full$40,400, but more than$10,000, the exact number is going to depend on Magi.
• 6:01
  SPEAKER_00: A woman earning$700,000 receives essentially no benefit at all.
• 6:06
  SPEAKER_00: Her salt cap is going to be$10,000, the same as it was before.
• 6:10
  SPEAKER_00: The salt interaction with capital gains I mentioned in an earlier episode, it's something you need to pay attention to.
• 6:16
  SPEAKER_00: So if you realize a large capital gain this year, that could push your magi above that$505.
• 6:21
  SPEAKER_00: And that gain could reduce your salt deduction simultaneously.
• 6:25
  SPEAKER_00: Every dollar of capital gains in that phase out range costs you not just the capital gains tax.
• 6:31
  SPEAKER_00: It also costs you 30 cents of additional salt deduction that is lost.
• 6:36
  SPEAKER_00: Modeling the interaction before realizing gains, it is essential to do.
• 6:41
  SPEAKER_00: This is exactly why your tax picture needs to be analyzed historically, not just one piece at a time.
• 6:48
  SPEAKER_00: The salt crap increase is genuinely meaningful, but it's got that expiration date and the income ceiling.
• 6:54
  SPEAKER_00: So treating it like it's a permanent universal benefit is a clear mistake.
• 6:59
  SPEAKER_00: And treating it as a time-limited window to maximize your deduction when it's available, that is a true planning opportunity you need to be taking advantage of with your financial team.
• 7:11
  SPEAKER_00: Let's break down some strategies that are worth knowing.
• 7:13
  SPEAKER_00: Strategy number one is confirm whether or not you should be itemizing in 2026.
• 7:17
  SPEAKER_00: The first step is simple.
• 7:18
  SPEAKER_00: Add up your salt deduction, mortgage interest, any charitable contributions, and any other itemized deductions.
• 7:25
  SPEAKER_00: If the total exceeds more than$32,200 for a married coupling filing jointly, itemizing will save you money compared to the standard deduction.
• 7:34
  SPEAKER_00: Now, for many women in high tax states with mortgages and charitable giving, the math now clearly favors itemizing in a way that it may not have since 2017.
• 7:45
  SPEAKER_00: Strategy number two, if you are a business owner or partner, ask about the pass-through entity tax.
• 7:52
  SPEAKER_00: Now, this is called the PTET, the pass-through entity tax, and it is a strategy that it's only available in 36 states.
• 7:58
  SPEAKER_00: However, if you are in one of these higher tax states like New Jersey or New York, that allows a partnership and an S corporation to pay state income tax at the entity level rather than at the individual level.
• 8:10
  SPEAKER_00: The entity is going to deduct the state tax as a business expense completely outside the individual salt cap.
• 8:17
  SPEAKER_00: Now, for business owners with income above the$505,000 phase out threshold who receive no benefit from the salt cap, increase the PTAT often is a more powerful tool to use.
• 8:30
  SPEAKER_00: Importantly, the one big beautiful bill did not eliminate this workaround, even though earlier versions of the bill they tried to attempt to, but it didn't pass.
• 8:39
  SPEAKER_00: And it remains available.
• 8:40
  SPEAKER_00: So if you own a pass-through business and you haven't discussed this option with your accountant, this is a conversation that should happen before year end.
• 8:50
  SPEAKER_00: Strategy number three, modeled out the years ahead.
• 8:53
  SPEAKER_00: The window is closing in 2030.
• 8:55
  SPEAKER_00: So the salt cap increase is going to run through 2029 and it's going to revert to that$10,000 in 2030.
• 9:02
  SPEAKER_00: If you have timing discretion over any state tax payments, property tax payments, accelerating deductible expenses, the four-year window to maximize your salt deduction is right now.
• 9:14
  SPEAKER_00: This is especially relevant if your 2030 and beyond income picture looks pretty similar.
• 9:20
  SPEAKER_00: A CPA who is proactively modeling your 2026 through 2029 salt deduction, not just filing for your current year taxes, but should be giving you real planning value, should help model this out for you.
• 9:32
  SPEAKER_00: I want to tell you about a client.
• 9:34
  SPEAKER_00: Her name has been changed to Christine to protect her identity.
• 9:37
  SPEAKER_00: At 59, she spent 30 years as a litigator at a large law firm starting her own practice seven years ago.
• 9:44
  SPEAKER_00: She owns a home in Summit, New Jersey, where property taxes are through the roof, and hers are approximately$22,000 a year.
• 9:51
  SPEAKER_00: She pays around$28,000 in New Jersey state income tax in most years.
• 9:55
  SPEAKER_00: Her combined salt before the cap is roughly$50,000.
• 9:59
  SPEAKER_00: And since 2018, her federal deduction for all that has been$10,000 every single year.
• 10:07
  SPEAKER_00: Here was the conversation we had.
• 10:09
  SPEAKER_00: When I reviewed her 2025 tax situation, this was the first year that the new cap applied.
• 10:14
  SPEAKER_00: So she could now deduct up to$40,000 of her salt deduction.
• 10:19
  SPEAKER_00: This is$30,000 more in salt deductions.
• 10:22
  SPEAKER_00: And her accountant had filed it, but she didn't mentally know that this change had occurred.
• 10:27
  SPEAKER_00: And at her income level, her practice is generating around$420,000 in net income in most years.
• 10:34
  SPEAKER_00: So she's below that$505,000 Magi phase out threshold.
• 10:39
  SPEAKER_00: So she's going to get that full$40,400 applied to her 32% marginal tax rate.
• 10:45
  SPEAKER_00: That's an additional$30,400 in salt deductions, reducing her federal tax bill by approximately$9,728 every year for as long as this rule will hold up.
• 10:58
  SPEAKER_00: Here's what changes.
• 10:59
  SPEAKER_00: Her law practice is structured as an S-Corp.
• 11:01
  SPEAKER_00: So we discussed between her, myself, and the CPA, New Jersey and the PTET election, allowing the S-Corp to pay the state income tax at the entity level and deduct it as a business expense for any year where her income approaches or exceeds that$505,000.
• 11:18
  SPEAKER_00: And this strategy would protect her salt benefit regardless of the individual phaseout.
• 11:24
  SPEAKER_00: Through this strategy, we were able to talk about it from each angle and brought the entire financial team together, looked at it from a new perspective.
• 11:32
  SPEAKER_00: As always, let's break down our three actions to do from here.
• 11:35
  SPEAKER_00: Action number one is I want you to call your accountant and ask a very specific question.
• 11:40
  SPEAKER_00: Should I be itemizing for the year 2026?
• 11:43
  SPEAKER_00: And at this point, you should have a pretty good idea.
• 11:45
  SPEAKER_00: And if so, what is the actual salt deduction you'll be able to take?
• 11:49
  SPEAKER_00: This isn't just a, hey, does the new cap help me, but can you take the full deduction?
• 11:54
  SPEAKER_00: Your salt bill, your mortgage interest, your charitable giving, and whether the itemized total is going to be that standard deduction.
• 12:01
  SPEAKER_00: And if the answer is yes and you haven't been itemizing, your accountant should be going back and reviewing the past tax year since 2025 to make sure that you are capturing the full benefit.
• 12:11
  SPEAKER_00: And if your income is near that 500,000, ask specifically about the phase out and whether the PTET is a better approach for your situation.
• 12:22
  SPEAKER_00: Action number two, if you own a pass-through business, so an S-Corp, a partnership, an LLC taxes, a partnership, ask about the New Jersey or the New York PTET election before year end.
• 12:35
  SPEAKER_00: This is a timing sensitive decision.
• 12:38
  SPEAKER_00: PTET elections often need to be made and payments submitted before December 31st in order to be deductible in the current tax year.
• 12:47
  SPEAKER_00: So if you have not had this conversation with your accountant yet, have it this month, not December.
• 12:54
  SPEAKER_00: October is the time to do it.
• 12:56
  SPEAKER_00: Action number three is model out your salt deduction for 2027, 2028, and 2029, not just 2026.
• 13:03
  SPEAKER_00: That salt cap increase is a four-year window.
• 13:07
  SPEAKER_00: And if your state and local taxes are consistently high, the cumulative value of maximizing your salt deductions over four years can be substantial.
• 13:17
  SPEAKER_00: Ask your accountant and say, given that this reverts in 2030, is there anything that I should or could be doing 2026 through 2029 to accelerate or optimize my salt deduction in the window while it's open?
• 13:31
  SPEAKER_00: And if the answer is no, at least you have that peace of mind going forward.
• 13:37
  SPEAKER_00: For eight years, women and their families who were in high tax states have been paying federal tax penalties for where they chose to live or had to because of work.
• 13:46
  SPEAKER_00: That penalty has been lifted for four years.
• 13:49
  SPEAKER_00: And the women whose income falls below that phase-out threshold, they have a window that should be used.
• 13:55
  SPEAKER_00: Model it carefully.
• 13:56
  SPEAKER_00: And if your income is above that$500,000, make sure you understand what's available to you through potentially the PTET so you don't miss that benefit entirely.
• 14:06
  SPEAKER_00: If this episode clarified something for you that maybe you've been confused or unsure about since the OBBA passed, please share it with somebody who it would benefit.
• 14:15
  SPEAKER_00: This is exactly the kind of real specific state level planning conversations that most financial teams skip altogether.
• 14:23
  SPEAKER_00: Make sure you're also following so you get every episode the second it drops.
• 14:27
  SPEAKER_00: And if you want to sit down and build out your financial team to model your specific salt situation, your income, your business structure, property taxes, and want your financial advisor and CPA working together, we can fill that financial advisory seat and you can head over to apply for an intro call at tannisfingroup.com slash contact.
• 14:48
  SPEAKER_00: Let's make sure that you are not leaving this deduction or any of them on the table.
• 14:52
  SPEAKER_00: I will see you again next week for another episode of the Wealth Cafe.