A few years ago, “SALT cap” became one of those phrases people tossed around at dinner like everyone knew what it meant.

Most people didn’t. They still don’t.

And honestly, that’s fair. It’s a wonky rule that only matters when it matters. Which is usually:

• you live in a higher-tax state

• you own a home (sometimes two)

• you earn enough that your state taxes and property taxes are real numbers

• you’re trying to figure out why your itemized deductions don’t move like they used to

So let’s make this simple and practical.

You’re going to answer one question by the end:

Do you actually benefit from the SALT cap rules right now… or not?

First: What is the SALT deduction?

SALT stands for State And Local Taxes.

If you itemize deductions on Schedule A, the tax code lets you deduct certain state and local taxes you paid during the year:

• State and local income taxes (withholding + estimates + balance due paid)

• OR state and local sales taxes (you choose one, not both)

• Local property taxes (real estate taxes)

That’s the “SALT deduction.” The IRS overview is straight to the point.

What doesn’t count?

• Federal income taxes

• HOA dues

• Insurance

• Utility bills

• Random “fees” that aren’t actually taxes

So far, so good.

Then comes the part people trip over.

The SALT cap right now (and why it’s not “just $10,000” anymore)

For Tax Year 2025, the overall SALT deduction limit is:

• $40,000 (most filers)

• $20,000 if you’re married filing separately

But that’s not the whole story.

There’s also an income-based reduction (phase-down), and if your income is high enough, you may end up right back near the old world.

For Tax Year 2026, the cap increases slightly to $40,400 (and thresholds tick up too), based on the indexed amounts discussed in multiple summaries of the current law changes.

The “floor” that matters

Even if you’re phased down, the cap will not be reduced below:

• $10,000 (most filers)

• $5,000 (married filing separately)

That floor matters because it’s the reason some very high earners shrug and say, “I don’t benefit.”

Sometimes they’re right.

Who actually benefits from the higher SALT cap?

Here’s the cleanest way to say it:

The SALT cap only helps you if you itemize.

If you take the standard deduction, it’s basically background noise.

People who tend to benefit

• You already itemize (or you’re close)

• You pay large state income taxes and/or large property taxes

• You live in a higher-tax state where your SALT bill is routinely above $10,000

• Your income is under the phase-down threshold (or not far above it)

The IRS instructions confirm the current $40,000 cap and the income threshold where the limit starts to reduce.

People who often don’t benefit much

• You take the standard deduction every year (common)

• You don’t own a home (or your property tax is modest)

• Your state income tax isn’t that high

• Your income is high enough that the cap gets pushed down toward the $10,000 floor

This is where people get annoyed.

They heard “cap is higher now” and assumed “my taxes are lower now.”

Not always.

The phase-down: what happens around $500,000 MAGI

For 2025, the rule is:

• The $40,000 cap is reduced if your modified adjusted gross income (MAGI) is over

  • $500,000 (most filers)

  • $250,000 (married filing separately)

• But again, it won’t be reduced below $10,000 / $5,000

If you want the conceptual version:

• Below $500k MAGI: you may get the full cap (if you itemize)

• Above $500k MAGI: the benefit shrinks

• Far enough above: you may end up functionally capped at $10k

Some summaries describe the phase-down rate and mechanics in plainer English than the IRS does.

If you’re hovering around that $500k line, this is one of those “model it, don’t guess” situations.

The break-even math: itemize vs standard deduction (the real gatekeeper)

Here’s the part I wish more people understood:

The SALT cap does not matter unless your itemized deductions beat your standard deduction.

Your itemized pile usually looks like:

• SALT (up to your allowed cap)

• Mortgage interest

• Charitable giving

• A few other smaller buckets

If that total is greater than your standard deduction, itemizing helps.

If it isn’t, then the SALT cap could be $40,000 or $400,000 and it still wouldn’t change your return. You’d take the standard deduction anyway.

The IRS Schedule A instructions are the right reference point for what goes where and how the limitation applies.

Why geography still matters (even with a higher cap)

A $40,000 cap is a big deal… if you’re someone who pays more than $10,000 of SALT.

That’s disproportionately:

• high earners in high-tax states

• homeowners with higher property taxes

• households with both (which is a lot of physicians, owners, and executives)

Some mainstream investor education sources explain this effect clearly: higher cap, but with caveats, and most useful in high-tax situations.

W-2 employees vs business owners: not the same game

A W-2 earner’s SALT story is usually:

• itemize or don’t

• cap applies

• move on

Business owners (especially pass-through owners) may have another lever: PTET.

PTET stands for Pass-Through Entity Tax. Some states let an S Corp or partnership pay a state tax at the entity level, and then the owners receive a credit on their personal return.

Why people care:

• The entity-level tax deduction can reduce pass-through income

• That reduction generally isn’t treated as a Schedule A SALT item subject to the individual cap

The IRS’s Notice 2020-75 laid the groundwork for this treatment, and many practitioner resources summarize it the same way: entity-level “specified income tax payments” aren’t counted against the individual SALT limitation.

So no, W-2 employees and business owners don’t benefit the same way.

Sometimes the difference is huge.

Does PTET still matter now that the cap is higher?

Often, yes.

Because if you’re in a state with PTET and your state tax bill is big enough, the higher SALT cap may still leave deductions “trapped” above the cap.

PTET can still be useful because it aims to move part of that tax cost into an entity-level deduction that reduces pass-through income.

Also: PTET is messy in real life.

• It’s state-specific

• There are elections and deadlines

• It interacts with credits and apportionment and owner situations

• It can be great—or it can be pointless—depending on facts

That’s why it’s a planning topic, not a TikTok tip.

Trusts and “stacking” SALT: the reality check

You’ve probably seen headlines like:

“Use trusts to get multiple SALT caps!”

Sometimes these strategies are discussed in the context of no grantor trusts and deduction limitations.

The truth is:

• Yes, structure can change outcomes

• No, it’s not a universal hack

• You don’t want to be the test case for an aggressive interpretation

If you’re considering trust/entity planning, you want a clean purpose, clean administration, and clear reporting. You also want someone running the numbers before you spend legal fees chasing a theory.

Common SALT mistakes (the ones we keep seeing)

These are the repeat offenders:

• Assuming you benefit because you heard the cap is higher (but you still take the standard deduction)

• Ignoring the phase-down above $500k MAGI

• Trying to deduct income tax and sales tax in the same year (you choose one)

• Forgetting married filing separately has lower limits

• Misclassifying “fees” as taxes

• Not coordinating PTET correctly (or missing elections/deadlines)

If you want one “rule of thumb” to keep:

Don’t decide SALT strategy in March. Decide it while you still have choices.

A simple “Who benefits?” quick test

If you want a fast read on whether this matters to you, try this:

1. Do you itemize most years?

• If no, SALT probably won’t change anything (yet).

2. Are your state income taxes + property taxes over $10,000?

• If no, the new cap is irrelevant.

3. Are you under $500k MAGI (or close)?

• If yes, you’re more likely to see the benefit.

4. Do you own a pass-through business in a PTET state?

• If yes, you may have planning options beyond Schedule A.

That’s it. No drama.

Just math and structure.

Where Provident fits (the practical next step)

SALT is not a standalone strategy. It’s a piece of the return.

The real win is when SALT planning sits inside a bigger plan:

• income timing

• entity strategy

• quarterly tax systems

• retirement contributions

• deduction coordination

That’s also why topics like safe harbor rules and IRS penalties for business owners matter more than people think once you start doing real planning.

And yes, sometimes the best “SALT strategy” is boring:

• tighten your estimate system

• stop guessing

• build a quarterly rhythm (and actually follow it)

If you’re trying to run your financial life like a business (which you should), even planning frameworks outside tax can help—like the 10-year target, 3-year picture, 1-year plan, and quarterly rocks.

Also, while we’re talking about deductions people love to ask about, you’ll probably enjoy these (even if they’re not directly “SALT”):

• what are capital expenditures?

• heavy vehicle and home office tax deductions

• IRS updates and reminders via IRS tax tips

• physician-focused planning context in the Physician Tax Planning Guide

• and the evergreen decision point of 1099 vs W-2 for physicians tax planning

FAQ

Does everyone get the SALT deduction?

No. Only people who itemize on Schedule A. If you take the standard deduction, SALT doesn’t help.

What taxes count toward SALT?

State and local income taxes (or sales tax instead), plus real estate property taxes.

What is the SALT cap for 2025?

For 2025, the limit is $40,000 (or $20,000 if married filing separately), with an income-based reduction above certain MAGI levels.

Does the SALT cap go back down if my income is high?

It can. Above $500,000 MAGI (or $250,000 MFS) the cap is reduced, but it won’t drop below $10,000 (or $5,000 MFS).

Is the cap still $10,000 for some people?

Yes. If you don’t itemize, or your deductions don’t beat the standard deduction, or your cap phases down far enough, you may effectively be living in the $10,000 world.

Does living in a high-tax state matter?

Usually, yes. Higher state income taxes and higher property taxes make it more likely you’ll hit the cap and see a benefit from the increase.

What is PTET and why do business owners keep talking about it?

PTET is a pass-through entity tax election available in some states. In many cases, it can create an entity-level deduction that reduces pass-through income, generally outside the individual SALT cap limitation framework described in IRS guidance.

Should I do PTET now that the cap is higher?

Sometimes yes, sometimes no. It depends on your state, your entity type, your income, your credits, and whether you’re actually leaving deductions “trapped” above the cap.

What’s the biggest SALT mistake?

Assuming you benefit without checking whether you itemize and whether your deductions beat the standard deduction. The cap can be higher and still do nothing for you.

What should I do next if I’m not sure?

Run a clean comparison (itemize vs standard) and model the phase-down if you’re near the MAGI threshold. If you own a pass-through, model PTET too. This is one of those areas where guessing is expensive.