The One Big Beautiful Bill Act (OBBBA) raised the federal SALT deduction cap from $10,000 to $40,000 for 2025, increasing to $40,400 in 2026 and rising 1% annually through 2029 before snapping back to $10,000 in 2030. High earners get less benefit: the cap phases down by 30% of modified AGI above $500,000, though it never drops below $10,000. For Ohio homeowners and business owners, this reopens decisions about itemizing, pass-through entity tax (PTET) elections, and payment timing.
What Actually Changed With the SALT Cap
What changed: OBBBA raised the itemized deduction limit on state and local taxes from the flat $10,000 set by the 2017 Tax Cuts and Jobs Act to $40,000 for 2025, with a small annual increase through 2029.
Who it affects: Any taxpayer who itemizes and pays significant property, income, or sales tax.
What to do: Re-run your itemized versus standard deduction comparison now – many households that switched to the standard deduction after 2017 may benefit from itemizing again.
Ohio/Columbus Note: Franklin County’s rising property valuations make this recalculation especially worthwhile for local homeowners.
Who Benefits Most From the Higher Cap
What changed: The $40,000 cap applies in full to taxpayers with modified AGI at or below $500,000.
Who it affects: Middle- and upper-middle-income households in higher-tax states, particularly those with property tax bills exceeding $10,000.
What to do: Add up your property tax, state income tax withholding, and estimated payments to see how close you are to the full $40,000 benefit.
Ohio/Columbus Note: Combined with Ohio’s municipal income taxes, many Columbus-area professionals will see a meaningful deduction increase.
The High-Income Phase-Down You Can’t Ignore
What changed: Above $500,000 in modified AGI, the $40,000 cap shrinks by 30 cents for every dollar of income over that threshold, but the floor is always $10,000.
Who it affects: High earners (often business owners, executives, and dual-income professional households) whose MAGI lands roughly between $500,000 and $600,000-plus.
What to do: Model your specific MAGI against the phase-down formula before assuming you’ll get the full $40,000.
Ohio/Columbus Note: This hits Columbus-area physicians, attorneys, and business owners harder than it might appear at first glance.
Does a Pass-Through Entity Tax Election Still Make Sense?
What changed: PTET elections let business owners deduct state taxes at the entity level, bypassing the individual SALT cap entirely – a workaround that mattered far more when the cap was $10,000.
Who it affects: Owners of S corporations, partnerships, and LLCs taxed as pass-throughs, especially those phased down near the $10,000 floor.
What to do: If your MAGI is above $500,000, keep your PTET election; if you’re comfortably under it, compare the numbers since itemizing may now get you close to the same result.
Ohio/Columbus Note: Ohio’s PTET election remains available and still worth a fresh look with our Tax Advisory team.
Timing Your Property Tax and Estimated Payments
What changed: Because the cap phases down with income and disappears entirely after 2029, the calendar year you pay deductible state and local taxes can change your outcome.
Who it affects: Taxpayers near the $500,000 MAGI threshold or anyone with flexibility on when they remit property tax or estimated state payments.
What to do: Consider whether prepaying a December property tax installment or fourth-quarter estimate (instead of paying in January) better positions you for the current year’s cap.
Ohio/Columbus Note: Franklin County allows early payment of the second-half property tax installment, which can be a useful lever here.
The 2029 Sunset: Why Waiting Could Cost You
What changed: The $40,000-and-rising cap is temporary; it reverts to a flat $10,000 for tax years after 2029.
Who it affects: Anyone currently benefiting from the higher cap who assumes it’s permanent.
What to do: Unlike typical deduction planning, this may call for accelerating discretionary deductible state and local payments into 2025 through 2029 rather than deferring them.
Ohio/Columbus Note: Our related post on Ohio’s PTET election covers how these two strategies interact over the next five years.
Ready to See What the $40,000 SALT Cap Means for Your Return?
The new cap, the phase-down, and the 2029 sunset all interact differently depending on your income, your entity structure, and your payment timing – which means a generic answer won’t cut it. Schedule a SALT planning review with Harper & Co CPAs Plus today, and our Columbus-based team will map out exactly what the $40,000 limit means for your 2025 return before year-end deadlines close in.
Frequently Asked Questions
What is the new SALT cap for 2025?
The SALT deduction cap for 2025 is $40,000, up from $10,000 under prior law. It rises to $40,400 in 2026, increases 1% annually through 2029, and then reverts to $10,000 for tax years starting in 2030.
Who qualifies for the full $40,000 SALT deduction?
Taxpayers with modified AGI of $500,000 or less qualify for the full $40,000 cap in 2025. Above that threshold, the cap phases down by 30% of the excess income, though it never falls below $10,000.
How does the SALT cap phase-down work for high earners?
For every dollar of modified AGI above $500,000, the $40,000 cap is reduced by 30 cents. This means higher earners can be phased down close to the old $10,000 limit well before reaching $1 million in income.
Is a pass-through entity tax (PTET) election still worth it?
It depends on income. Owners phased down near the $10,000 floor still benefit significantly from PTET, since it isn’t subject to the individual SALT cap. Owners under $500,000 MAGI should compare PTET against simply itemizing.
Should I itemize or take the standard deduction in 2025?
With the SALT cap now at $40,000, many taxpayers who switched to the standard deduction after 2017 should recalculate. If your property tax, state income tax, and other SALT items approach or exceed the standard deduction amount, itemizing may now win.
Will the $40,000 SALT cap last forever?
No. The increased cap is scheduled to expire after 2029, reverting to a flat $10,000 in 2030. Taxpayers who benefit from the higher cap should consider accelerating deductible state and local payments before the sunset.
Does the SALT cap change affect Ohio and Columbus taxpayers differently?
Ohio’s municipal income taxes combined with rising Franklin County property valuations mean many Columbus-area households and business owners will see a larger deduction swing than the national average, making 2025 planning especially valuable locally.
Recent Comments