Yes, the SALT (State and Local Tax) deduction is coming back in a bigger way for a limited time: the cap increased from $10,000 to $40,000 for the 2025 tax year, under the new One Big Beautiful Bill Act (OBBBA) that extended some TCJA provisions. This higher cap runs through 2029, increasing slightly annually, then reverts to $10,000 in 2030, with income phase-outs for higher earners.
Under the final law, the SALT deduction cap increases to $40,000 in 2025 and then rises by 1% annually through 2029. Beginning in 2030, the cap reverts to $10,000, which becomes its permanent level. As a result of the annual adjustment, the cap is set at $40,400 in 2026.
What is the new SALT cap for 2025? Under new tax law, the SALT deduction cap increased to $40,000 for most filers ($20,000 for those married filing separately) beginning in tax year 2025. The cap will also see a 1% annual increase through tax year 2029.
What has changed with SALT deductions? For the past eight years, the SALT deduction cap had been set at $10,000. Starting tax year 2025, the SALT cap temporarily goes up, starting at $40,000. That amount will increase by 1% annually until tax year 2029.
People who turned 65 by Dec. 31, 2025, are eligible for the new deduction, according to the IRS. The deduction provides $6,000 for each qualifying individual, or $12,000 for married couples who both qualify. The tax break is subject to income limits.
Yes, Medicare premiums (Parts A, B, C, and D) can be tax-deductible as medical expenses if you itemize deductions on Schedule A and your total qualified medical costs exceed 7.5% of your Adjusted Gross Income (AGI), but self-employed individuals have a special rule allowing them to deduct premiums above the line, directly reducing AGI.
President Trump's proposed tax changes, as part of the "One Big Beautiful Bill," include a temporary increase in the State and Local Tax (SALT) deduction cap, raising it from $10,000 to $40,000 for tax years 2025-2029, with gradual annual increases until 2029 before reverting to $10,000 in 2030, though a significant "SALT torpedo" phase-out begins for incomes above $500,000 (married filing jointly), creating potentially high effective tax rates in that income bracket.
For tax year 2025, the State and Local Tax (SALT) (SALT) deduction limit increases significantly to $40,000 (or $20,000 if married filing separately), up from the previous $10,000, allowing itemizers in high-tax states to deduct more property, income, and sales taxes, though this limit begins phasing out for higher incomes (over $500,000 MAGI) and eventually drops to $10,000. This change comes from recent legislation, potentially the "One Big Beautiful Bill Act" (OBBBA). Taxpayers should check if itemizing is better than the standard deduction (which also increased) and consider strategies like Pass-Through Entity Taxes (PTET) to maximize benefits.
The One, Big, Beautiful Bill Act significantly affects federal taxes, credits and deductions. It was signed into law on July 4, 2025, as Public Law 119-21, and takes effect in 2025.
The SALT deduction enables certain taxpayers to reduce their federally taxable income by the amount of state and local taxes they paid that year, up to $10,000, or $5,000 for married filing separately, for 2024. The limit is $40,000, or $20,000 for married filing separately, for 2025.
At the end of 2025, the individual tax provisions in the Tax Cuts and Jobs Act (TCJA) expire all at once. Without congressional action, most taxpayers will see a notable tax increase relative to current policy in 2026.
Yes, in 2024, each parent could gift $18,000 to a child (totaling $36,000 per child for the couple) without tax implications, and for 2025, that amount increased to $19,000 per parent ($38,000 per child) because the annual gift tax exclusion is adjusted for inflation, requiring separate checks for each parent to utilize the full amount, according to TurboTax, Yahoo Finance, Guardian Life, IRS (.gov), and Mercer Advisors.
SALT Mistakes to Avoid
If itemized deductions don't exceed the standard deduction, the higher SALT cap won't help. Paying state/local taxes early might not count if the jurisdiction doesn't allow prepayment. Watch for the Alternative Minimum Tax (AMT) — it can reduce the SALT benefit.
The law increases the $40,000 SALT cap and $500,000 income threshold by 1% each year from 2026 through 2029, with the cap reset to $10,000 from 2030 onwards.
The top individual marginal income tax rate tended to increase over time through the early 1960s, with some additional bumps during war years. The top income tax rate reached above 90% from 1944 through 1963, peaking in 1944, when top taxpayers paid an income tax rate of 94% on their taxable income.
Yes, many individual provisions of the Trump-era Tax Cuts and Jobs Act (TCJA) from 2017 are set to expire at the end of 2025, reverting tax law to pre-2017 levels unless Congress acts, with key changes including the standard deduction, SALT deduction cap, and estate tax rules set to change, although legislation like the "One Big Beautiful Bill Act" (OBBBA) has since extended some of these cuts into the future, changing the original expiration cliff.
Yes, health insurance premiums, including Medicare Part B/D, are often tax-deductible for retirees, but only if you itemize deductions on Schedule A and your total unreimbursed medical expenses (including premiums) exceed 7.5% of your Adjusted Gross Income (AGI). This applies to premiums paid with after-tax dollars for plans like Medicare, Marketplace, or some retiree plans, but not if paid pre-tax from a retirement account.