The SALT Cap: What It Is and Why It Matters

At J.F. Williams Co., Inc., we know that navigating tax laws can feel overwhelming, especially when changes to those laws could impact your financial well-being. That’s why we’re here—to help you understand the complexities and confidently approach your financial goals.

One topic that’s been gaining attention is the SALT cap, a rule introduced in 2017 that limits how much state and local taxes (SALT) can be deducted from federal tax returns. Let’s explore what this means and how potential changes could present planning opportunities for you.

What Is the SALT Cap?

The SALT cap is a limitation on the amount of state and local taxes you can deduct on your federal income tax return. Since its introduction under the Tax Cuts and Jobs Act of 2017, taxpayers have been limited to deducting a maximum of $10,000 per year in SALT as an itemized deduction.

For individuals who live in states with high income or property taxes, this cap has significantly reduced the likelihood of itemizing deductions, making the standard deduction more appealing.

Why the SALT Cap Might Change

For years, there has been discussion about reforming or even eliminating the SALT cap. While no changes have been finalized, there’s growing speculation that 2025 could bring adjustments to this rule. If these changes occur, they could open up opportunities for individuals to optimize their tax strategies.

A Thoughtful Planning Opportunity

If the SALT cap is lifted or adjusted in 2025, one potential strategy is to consider delaying certain state and local tax payments until that year, as long as doing so wouldn’t incur penalties. By postponing these payments, you might increase your deductible amount for 2025, allowing you to maximize your tax savings.

However, it’s important to approach this strategy thoughtfully. Tax planning is complex, and what works for one person may not work for another. Delaying payments might not guarantee better outcomes, even if the SALT cap changes. That’s why it’s essential to review your unique circumstances carefully.

Why It’s Important to Consult a Professional

At J.F. Williams Co., Inc., we believe in making financial decisions with confidence and clarity. That’s why we encourage you to work closely with a trusted tax professional before making any adjustments to your plans for paying state and local taxes. Together, we can evaluate the potential benefits and ensure any actions align with your broader financial strategy.

Looking Ahead Together

The SALT cap is just one piece of the larger financial picture, and as changes arise, our commitment remains the same: to serve as your lifelong thinking partner. We’re here to help you navigate the evolving financial landscape with confidence and understanding, so you can stay on the path to your financial success.

If you have questions about the SALT cap or any aspect of your tax or financial strategy, don’t hesitate to reach out. We’re here to help you make informed decisions, no matter what changes the future may bring.