SALT Deduction Cap Increase in 2025: What New York Homeowners Need to Know

If you own a home in New York, you already know how heavy the tax burden can feel. Property taxes and state income taxes can feel overwhelming. Since 2018, the federal SALT deduction cap has made things tougher by limiting how much of those taxes you can deduct on your federal return. For many families on Long Island and throughout the NYC suburbs, that $10,000 cap has been a real financial hit.

A new federal law called the One Big Beautiful Bill Act (OBBBA) changes that starting in tax year 2025. For many New York homeowners, this shift will increase how much of what you already pay can actually count on your federal return.

Here is a clear look at what changed, who benefits most, and what to keep in mind as you plan for 2025.

What Is the SALT Deduction?

SALT stands for State and Local Taxes. If you itemize deductions on your federal return, you can deduct eligible state and local taxes you paid during the year.

SALT typically includes:

• State and local income taxes (or sales tax instead, if that’s better for your situation)

• Property taxes on real estate

• Certain personal property taxes

You only benefit from SALT if you itemize. Taxpayers who take the standard deduction do not receive any direct benefit from SALT.

What Changed Under the OBBBA?

The OBBBA temporarily raises the SALT cap for several years.

Prior rules (2018–2024): 

• SALT deduction cap: $10,000 per return, regardless of filing status.

New rules (2025–2029 under current law): 

• SALT deduction cap increases to up to $40,000 per return.

• If you are married filing separately, the cap is $20,000.

• The expanded cap increases slightly each year through 2029.

• There is an income phase‑down for higher earners.

• Beginning in 2030, the cap is scheduled to revert to $10,000, unless Congress extends the provision.

Income Phase‑Down (Important): The full $40,000 cap does not apply to everyone. Once your modified adjusted gross income (MAGI) passes certain thresholds (around $500,000 for most filers and $250,000 for married filing separately), the expanded cap begins to shrink. It can never go below the original $10,000 limit.

Who Benefits Most Under the New Cap?

Homeowners in high‑tax states benefit the most, especially New Yorkers whose property taxes alone often fall between $12,000 and $20,000.

You’re likely to benefit if:

• You itemize your deductions.

• Your combined property taxes and state income taxes exceed $10,000.

• Your income is below or near the phase‑down range.

Middle‑income and upper‑middle‑income homeowners fall into the strongest benefit group.

Example: How This Helps a New York Household

A homeowner pays:

• $17,000 in property taxes

• $9,000 in New York state income taxes

Total SALT: $26,000.

Before 2025: Only $10,000 was deductible.

Starting in 2025: They may be able to deduct the full $26,000, assuming they itemize and do not lose the expanded amount due to phase‑down.

The amount paid to the state doesn’t change - but the federal return finally reflects more of it.

What About Business Owners?

New York’s Pass‑Through Entity Tax (PTET) allows S corps and partnerships to pay certain NY taxes at the entity level. This can make those taxes deductible as business expenses for federal purposes.

Even with the higher SALT cap:

• PTET still matters for many pass‑through owners.

• The higher cap may reduce PTET’s advantage for some, but it doesn’t replace it.

If you use PTET, it’s worth reevaluating your approach for 2025.

Planning Tips for 2025

Here is a straightforward way to prepare:

• Estimate your 2025 SALT total. Add projected property taxes and state income taxes.

• Review itemizing vs. standard deduction. The expanded cap only helps if itemizing beats your standard deduction.

• Check your income range. If you’re near the phase‑down thresholds, the benefit may be reduced.

• Revisit PTET (if applicable). For business owners, the new cap may shift the cost‑benefit balance.

Planning early helps avoid surprises during tax season.

File Confidently with Gregg Jaffe Tax Services

The new SALT deduction rules offer meaningful relief for many New Yorkers, but the exact benefit varies widely from one household to another. With over 25 years of experience, Gregg Jaffe Tax Services in Plainview can help you understand exactly how these changes affect your federal and NY returns.

Whether you’re a homeowner, renter, retiree, or business owner, Gregg provides clear guidance and thorough tax planning tailored to your situation.

Phone: 516‑770‑5305

Contact Form: Get in Touch

Frequently Asked Questions

Does the higher SALT cap mean I should stop taking the standard deduction?

Not automatically. It depends on your total itemized deductions. For some, itemizing will now make sense again. For others, the standard deduction will still provide the better result.

Will the higher SALT cap stay this high permanently?

No. Under current law, the expanded cap runs from 2025 through 2029 and returns to $10,000 beginning in 2030.

Does New York follow the same rules?

Not always. New York often decouples from federal tax changes. Your federal and state returns may differ.