You might be leaving thousands of dollars on the table without even knowing it.
If you own a home, pay state income taxes, or have significant property taxes, there's a change coming to your 2025 tax return that could put real money back in your pocket.
But only if you know about it, and only if you're doing one specific thing on your tax return.
Let's talk about the SALT deduction cap increase, what it means for you, and whether you're actually set up to benefit from it.
The Good News: Your SALT Deduction Cap Just Increased
Starting with the 2025 tax year, the cap on state and local tax (SALT) deductions is increasing from $10,000 to $40,000.
That's a $30,000 increase in the amount you can deduct.
For someone with a 25% effective tax rate, that translates to up to $7,500 in tax savings. For those with higher effective tax rates, it could be even more. But here's the catch: this only applies to you if you're itemizing deductions on your tax return.
Historically, only about 15% of taxpayers itemize. Many default to the standard deduction without revisiting the math each year.
There are likely taxpayers currently taking the standard deduction who could—and should—be itemizing once the higher SALT cap takes effect. For homeowners in high-tax states, the additional $30,000 of potential deduction room may push total itemized deductions above the standard deduction threshold.
Understanding Schedule A: How Itemizing Actually Works
To understand who benefits from the SALT deduction increase, you need to understand Schedule A, which is where itemized deductions live.
Schedule A includes four main categories of deductions:
- Medical and dental expenses
- State And Local Taxes (SALT) - this is what’s changing
- Mortgage interest (and certain points)
- Charitable contributions
* There are also a handful of less common items that most taxpayers never use.
The SALT section includes:
- State income taxes paid (via W-2 withholding or estimated payments)
- Property taxes on your home
- Sales tax (an alternative to income tax, but usually less beneficial in high-income states)
Starting in 2018, the total SALT deduction was capped at $10,000, but in 2025 that cap increases to $40,000.
Who Actually Benefits From the Higher SALT Cap?
Not everyone. Let's break it down.
You’re most likely to benefit if:
- You own a home and pay meaningful property taxes
- You live in a high-tax state (California, New York, New Jersey, etc.)
- You pay significant state income tax
- Your total itemized deductions exceed the standard deduction ($15,750 for single filers and $31,500 for married filing jointly)[1]
- Your income is below the SALT phase-out threshold
You’re unlikely to benefit if:
- You rent (no property taxes)
- You live in a low-tax state
- Your total itemized deductions are still below the standard deduction
- You take the standard deduction every year
- Your income is high enough that the SALT increase is phased out
The Phase-Out: Where the Benefit Starts Disappearing
The higher SALT cap is not unlimited for high earners and begins to phase out at $500,000 modified annual gross income (MAGI) and $250,000 for married filing separately (MFS).
- The phase-out begins at $500,000 of MAGI and gradually reduces the allowable SALT deduction.
- By $600,000 of MAGI ($300,000 for MFS), the cap returns to the original $10,000 limit.
- The deduction does not disappear entirely; it simply reverts back to the long-standing $10,000 SALT cap once fully phased down.
Practically speaking:
- Taxpayers with incomes well above $600,000 of income generally see little to no benefit
- Taxpayers below $500,000 typically get the full $40,000 cap
- Those in between may receive a partial benefit
The Math: When Itemizing Actually Makes Sense
For 2025, the standard deduction is:
- Single: $15,750
- Married filing jointly: $31,500
If your total itemized deductions exceed those amounts, itemizing makes sense. If not, the standard deduction still wins.
The SALT increase matters most for people who were close to the standard deduction before. The extra SALT room can be the difference between taking the standard deduction and itemizing.
Two Important Caveats Most People Miss
- Alternative Minimum Tax (AMT): SALT deductions don’t reduce AMT income, so some high-income taxpayers may see less benefit than expected.
- Marginal tax rates matter: The “$7,500 savings” assumes the full additional deduction is taxed at your marginal rate. Your actual savings depend on your bracket and overall return.
The Key Insight: Most People Don't Know About This
Here's what we see all the time: someone gets their tax return done and doesn't realize they could have itemized and saved thousands.
Why? Most people don't go deep into their tax return. They don't look at Schedule A. They don't understand the four buckets of deductions. They just know whether they're taking the standard deduction or itemizing.
And if their tax preparer doesn't proactively ask about all their deductions, they might miss this opportunity entirely.
What You Should Do Right Now
If you own a home in California or another high-tax state, here's what to do:
Step 1: Gather Your Information
- Property tax statements
- State income tax paid (from your W-2 or estimated tax payments)
- Mortgage interest statements
- Charitable contribution receipts
Step 2: Talk to Your Tax Preparer
Tell them: "I want to make sure I'm capturing all my Schedule A deductions, especially with the SALT cap increase to $40,000. Can you show me whether I should be itemizing?"
Step 3: Ask the Right Questions
- "What are my total itemized deductions?"
- "Does that exceed the standard deduction?"
- "Am I capturing all my SALT deductions?"
- "Should I be itemizing instead of taking the standard deduction?"
Step 4: Don't Assume You Know the Answer
Even if you've been taking the standard deduction for years, the SALT increase might change the math. It's worth asking.
The Bottom Line
The SALT deduction cap increase is real — and for the right taxpayer, it can be worth thousands of dollars per year.
But it only helps if:
- You itemize deductions
- Your total itemized deductions exceed the standard deduction
- Your income isn’t high enough to phase the benefit out
- You actually review Schedule A instead of defaulting to the standard deduction
This isn’t automatic. It requires awareness and a conversation. The good news is that this is easy to figure out. It just takes a conversation with your tax team.
Ready to make sure you're capturing the full benefit of the SALT deduction increase? Let's talk about your specific situation.