Today, we are diving into a topic that sounds like something you would find in your kitchen. But trust us, it belongs in your tax plan: the SALT deduction.
What Is the SALT Tax Deduction?
SALT stands for State and Local Taxes. Yes, not nearly as tasty as French fries, but way more important come tax time. It includes what you pay in:
- State income taxes
- Local income taxes
- Property taxes
- Sales taxes (sometimes)
In short, it is the government taxing you… then giving you a tiny high-five for surviving it.
What Changed?
Before 2018, you could deduct all of those taxes on your federal return. But then the IRS said, “Let’s spice things up,” and capped it at $10,000.
So now, even if you pay $25,000 in property and state income taxes, you can only deduct $10K. Ouch, right?
Who Actually Cares About This?
If you live in a high-tax state – think California, New York, New Jersey, or Illinois – this cap hits you hard. For those of us in lower-tax states, it might not change much. But it is still worth paying attention to, especially if you are on the edge of that $10K cap.
Any Way Around It?
Well, kind of. A few states have tried workarounds with special trusts and pass-through entity tax elections (no need to memorize that one). It might help business owners, but it is not a magic wand for everyone. That is why having someone smart in your corner (ahem us) makes a difference.
Why the SALT Tax Deduction Still Matters
The SALT deduction is not about seasoning… it’s about savings. And if you are not planning around it, you might be leaving money on the table. We can help you figure out if you’re getting the most from it, missing key savings, or just plain confused.
Want to know if SALT is costing you more than it should? We are happy to walk you through it. Just schedule a quick chat with our team today.