The $10,000 Deduction That’s About to Shift—Maybe
If you’re a high-earning business owner—especially in a high-tax state, chances are you’ve run up against the $10,000 limit on the SALT deduction. That’s the maximum amount you can deduct for state and local taxes (SALT) on your federal return. But that cap may soon be changing.
Here’s what’s happening and what it could mean for your tax planning.
What’s Changing?
Both the Senate and House have proposed new legislation that would raise the SALT cap to $40,000, starting in 2025, with a phaseout for those earning over $500,000.
Senate Bill:
Passed by a narrow 50-50 vote (with the Vice President breaking the tie), this bill proposes:
- Raising the SALT cap to $40,000
- Annual 1% increases through 2029
- Reversion back to $10,000 in 2030
House Bill:
A different version already passed in the House suggests:
- The same $40,000 starting point in 2025
- Annual increases through 2033, where it would become permanent
- Restrictions on the popular SALT workaround used by many pass-through entities (like S-Corps and partnerships)
What Happens Next?
The two versions must now go through reconciliation in a Joint Conference Committee to resolve differences. This process could result in further changes—or stall the bill entirely. Regional politics and fiscal impact will play a big role in the outcome.
Why This Matters for Business Owners
- It could reduce your tax burden if you’re currently limited by the $10K cap.
- It might change how you itemize—especially if you’re used to taking the standard deduction.
- If you’re using the pass-through workaround, the final version may limit that option for certain service based entities—meaning you’ll want to revisit your entity structure and tax strategy soon.
Our Take: Plan Ahead, Don’t Wait
These proposals aren’t law yet, but they signal how fast the tax landscape can shift. At Kinstler Brown, we work with clients to proactively adjust their tax planning so they’re not caught off guard.
Want to know how this affects your 2025 tax strategy? Let’s talk.
Chad Brown, Co-President of Kinstler Brown Companies, Inc., is passionate about helping small and medium-sized businesses thrive through strategic tax planning and financial coaching. With years of experience in tax consulting and accounting services, Chad specializes in developing customized solutions that maximize savings, optimize cash flow, and support long-term growth. His goal is to empower business owners to make confident financial decisions while minimizing tax liabilities.
Ready to start your journey to smarter tax strategies? Schedule a call with Chad today!