We’re just a few days away from the Fourth of July. And of course, Independence Day is more than just the food and your Milwaukee fireworks show. It’s a celebration of the idea that government should be of the people, by the people, for the people.
And yes, that sounds lofty in the middle of your backyard BBQ. But it’s still playing out today… in real time… in the Senate.
While you’ve been planning your cookout menu, lawmakers in D.C. have been in full gear. This past weekend included a 16-hour reading (yes, reading) of Trump’s tax bill on Saturday, followed by a full 10 hours of debate on Sunday. And on Monday, the Senate voted on it with a push to pass it before the July 4th holiday.
One key piece that could have a big impact on your taxes? SALT deductions.
Because this legislation is still in motion, we won’t know the final picture on this until the dust settles. Still, this is the moment to pay attention. How you handle things like property tax payments, estimated taxes, and even charitable giving in the months ahead could hinge on what passes this week.
Now, before we get into the nitty gritty of tax legislation, a quick note: The IRS is experiencing delays processing electronic payments. Meaning, you might receive a “balance due” notice even though you paid on time.
If you paid your full tax liability electronically and on time, don’t respond to the notice. Check your IRS online account to monitor payment status, and the IRS will automatically adjust any penalties and interest once your payment processes.
And if you’re not sure about your specific situation, reach out. Moments like these are I’m here for: 414-325-2040
Now, let’s take a closer look at the SALT on the table (get it?) — and what it could mean for your 2025 tax strategy.
SALT Deductions Tax Strategies for Milwaukee Businesses (2025 Edition)
“Good fortune often happens when opportunity meets with preparation.” —Thomas A. Edison
If you’ve ever felt like you’re taxed twice on the same income — once by your state and again by the IRS — you’re not wrong. And if you live in a high-tax state, this one rule could make a big difference in what you owe in 2025 (and beyond)… the SALT deduction cap.
Let’s break down what it is, why it matters, and what you can do right now to get ahead of whatever Congress decides.
And if you pay significant state income taxes or own property in a high-tax area, this single provision could change how much of your income gets taxed by the IRS.
Quick Answer: Your SALT Deductions Tax Strategy for 2025
- The current situation: The 10K SALT deduction cap expires after 2025, with Congress debating whether to raise it to 40.4K (House proposal) or keep it at 10K (Senate position).
- The potential impact: If you pay more than 10K in state/local taxes, a higher cap could save you thousands in federal taxes.
- What you should do: Gather your state and local tax data to see how much you’re losing under the current cap, and get ahead on proactive planning strategies.
- The timeline: Congress aims to finalize the tax package this summer, so stay informed and be ready to adjust your strategy once the final decision is made.
“What is the SALT deductions tax?”
Before the 2017 Tax Cuts and Jobs Act (TCJA), you could deduct an unlimited amount of state income taxes, local property taxes, and even sales taxes from your federal taxable income.
That all changed starting in 2018. The TCJA placed a 10K cap on how much state and local tax you can deduct on your federal return (or 5K if you’re married filing separately). For many taxpayers (especially those in states like California, New York, New Jersey, Connecticut, or Illinois), this cap meant paying federal tax on money you already handed over to your state. Not ideal.
“What’s happening to the SALT deductions tax now?”
Here’s the current situation:
- The 10K cap is set to expire after 2025, unless Congress steps in.
- In Trump’s tax bill, the House proposed raising the cap up to 40.4K (the increased cap would phase down if your modified adjusted gross income is over 500K).
- The Senate proposed keeping the 10K cap in place for now (or even making that cap permanent).
- Some lawmakers are working toward a middle-ground compromise in the 25–30K range.
- As of now? There’s no final decision on the cap.
“How would this affect my tax bill?”
Let’s take an example: say you pay 25K in combined state income and property taxes. Under the current cap, only 10K of that is deductible on your federal return. You’re paying federal income tax on the other 15K.
Now let’s imagine the cap increases to 40K, as proposed by the House. You’d be able to deduct the full 25K — a difference of 15K in deductions. If you’re in the 32 percent federal tax bracket, that could translate to about 4.8K in federal tax savings.
Even if the final number lands at, say, 30K, you’d still get an extra 5-20 grand in deductions (depending on your situation). But if the cap doesn’t change, and the Senate’s position wins out, your deduction remains limited, and your tax burden stays higher.
“What should I be doing about the SALT deductions tax right now?”
Here’s my advice:
- Gather your tax data: Collect your state and local tax numbers from last year – including property taxes, state income taxes withheld, and estimated tax payments. This helps us see how much of your deduction is being left on the table under the 10K cap, and what’s at stake for you if that cap is raised (or stays the same).
- Be proactive: This uncertainty makes proactive tax planning key. There might be strategies we can use to better position you, regardless of what happens. Like timing certain payments, structuring deductions differently, or planning around expected income changes.
- Stay informed: Keep in mind – Congress’s goal is to finalize a tax package sometime this summer (though Congress doesn’t always move quickly or smoothly). I’m watching and preparing for different outcomes. And I’m ready to advise as soon as legislation moves.
The SALT deduction cap and you
The future of the SALT deduction cap is still up in the air, with the Senate’s version of the bill currently holding the line at 10K, far below the House’s proposed 40.4K. While lawmakers negotiate a final figure, the outcome could really impact your federal tax liability, especially if you live in a high-tax state. Now’s the time to assess your exposure and plan ahead – so you’re ready for whatever Congress decides.
FAQ
“I live in a state that has no state income tax. Does the SALT cap even affect me?”
Yes, it can still affect you if you own property. The SALT deduction includes property taxes, so if your annual property taxes exceed 10K, you’re hitting the cap.
“Should I prepay my 2026 property taxes in December 2025 to maximize my deduction?”
It depends on what Congress decides and your specific situation. If the cap stays at 10K and you’re already hitting it, prepaying won’t help. But if the cap increases significantly, there might be strategic timing opportunities. We’ll need to reassess your situation once the legislation is finalized.
“I’m changing my filing status to ‘married filing separately’ to try to get around the SALT cap. Is this a good strategy?”
Unfortunately, no. When you file separately, your SALT cap drops to 5K each instead of 10K combined. So you’re not gaining any advantage, and you’re likely losing other tax benefits that come with filing jointly. In most cases, married filing jointly is still the better option.
“What counts as ‘state and local taxes’ for the SALT deduction?”
The main ones are state income taxes, local income taxes, property taxes on your home and other real estate, and state sales taxes (you can choose to deduct either income taxes OR sales taxes, not both).
What it does NOT include? Federal taxes, estate taxes, or most fees and penalties.
“I heard some states created workarounds for the SALT cap. Should I look into those?”
Yes, some states did create charitable contribution programs or pass-through entity elections that can help certain taxpayers. These are complex and don’t work for everyone, but they’re worth discussing if you’re in a high-tax state and significantly affected by the cap. Let’s review your specific situation to see if any apply.
If this proposed change has you scratching your head (or reaching for a calculator), come talk to me. Let’s run your numbers and see what kind of exposure you have. Then, let’s build a plan that adapts before the rules change, not after:
414-325-2040