SALT Deduction Cap Increase in 2025: What New York Homeowners Need to Know
- Jim O'Callaghan, CPA
- 9 hours ago
- 4 min read
If you own a home in New York, you know how heavy the tax load can feel. Between property taxes, state income taxes, and the high cost of living, every dollar matters at tax time. Since 2018, the federal SALT deduction cap has limited most taxpayers to a maximum of 10,000 dollars. For many families in Queens and Long Island, that cap has been a real financial hit.
The One Big Beautiful Bill Act (OBBBA) changes that starting with the 2025 tax year. The expanded SALT deduction cap finally gives many New Yorkers room to breathe. For some households, the difference could be thousands of dollars in additional deductions.
Below is a clear breakdown of the new rules, who benefits most, and how to prepare for the year ahead.
What Is the SALT Deduction
SALT stands for State and Local Taxes. When you itemize deductions on your federal return, you can deduct eligible taxes you paid during the year. SALT typically includes:
State and local income taxes
Property taxes on real estate
Certain personal property taxes
You only receive the SALT benefit if you itemize. Taxpayers who take the standard deduction do not receive a direct benefit from SALT.
What Changed Under the OBBBA
Beginning with the 2025 tax year, the OBBBA raises the SALT deduction cap for several years.
New SALT deduction cap: up to 40,000 dollars per return
Married filing separately: up to 20,000 dollars
The expanded cap increases slightly each year through 2029 because of inflation indexing
Beginning in 2030, the cap is scheduled to return to 10,000 dollars unless Congress acts again
Income Phase Down
The full 40,000 dollar cap does not apply to everyone.
Phase down begins around 500,000 dollars of modified adjusted gross income for most filers
For married filing separately, phase down begins around 250,000 dollars
The SALT deduction can never fall below the original 10,000 dollar amount
If your income falls below or near the phase down range, you are more likely to receive the full benefit.
Why This Matters for New Yorkers
New Yorkers pay some of the highest taxes in the country. Property taxes in Nassau and Suffolk Counties often range from 12,000 to 25,000 dollars or more. State income taxes add even more to the total.
Under the old 10,000 dollar cap, most of that was not deductible at the federal level. The OBBBA now allows many households to deduct a much more accurate reflection of what they paid.
This expansion is especially helpful for:
Homeowners in Queens, Nassau, and Suffolk County
Households that already itemize or are close to itemizing
Middle income and upper middle income taxpayers
Retirees whose income falls below the phase down thresholds
For many New Yorkers, this could mean thousands of dollars in additional deductions.
Example: A Realistic New York Scenario
A homeowner pays:
17,000 dollars in property taxes
9,000 dollars in New York State income taxes
Total SALT: 26,000 dollars.
Before 2025: Only 10,000 dollars was deductible.
Starting in 2025: They may be able to deduct the entire 26,000 dollars, assuming they itemize and fall below the income phase down.
The amount they pay to New York does not change, but their federal return finally reflects more of what they actually paid.
What About Business Owners
New York’s Pass Through Entity Tax (PTET) allows S corporations and partnerships to pay certain taxes at the entity level, which makes those taxes deductible federally.
Even with the higher SALT cap:
PTET still benefits many pass through business owners
The expanded cap may reduce the advantage for some taxpayers
The best approach depends on income level and whether itemizing makes sense
If you use PTET, it is worth reevaluating your strategy for 2025.
How to Prepare for 2025
Here are a few simple steps to position yourself for the best outcome:
Estimate your 2025 SALT total, including property taxes and state income taxes.
Compare itemizing to the standard deduction. The expanded SALT cap only helps if your itemized deductions exceed the standard deduction.
Review your income level. If your modified adjusted gross income is near the phase down threshold, your benefit may be reduced.
Reevaluate PTET if you own a pass through business.
Stay organized. Accurate records make it easier to capture every deductible dollar.
Planning early helps you keep more of what you earn.
File Confidently with TaxMaster
Tax laws can change quickly, and the details matter. At TaxMaster, we help homeowners, retirees, families, and business owners throughout Queens and Long Island understand exactly how the new SALT rules affect both federal and New York State returns.
Our experienced preparers review every deduction and help you make informed decisions before filing.
Glendale Office: 718 326 0500
Melville Office: 631 673 0617
Contact TaxMaster Online: https://www.taxmasterinc.com/contact
Frequently Asked Questions
Does the higher SALT cap mean I should start itemizing again?
It might. If your total itemized deductions exceed your standard deduction, itemizing could make sense again.
Will the higher SALT cap stay this high permanently?
No. Under current law, the expanded cap applies from 2025 through 2029 and returns to 10,000 dollars in 2030 unless Congress changes it.
Does New York follow the same rules?
Not always. New York often decouples from federal changes, so your federal and state returns may differ.