How to maximize the $40,000 limit for 2025

President Donald Trump’s “big beautiful bill” raised the limit on the federal deduction for state and local taxes, known as SALT, and there are ways to maximize it for 2025, experts say.

If you itemize tax breaks, you can claim the SALT deduction, which includes state and local income taxes and property taxes. Trump’s 2017 legislation capped SALT at $10,000, which was a pain point for certain residents of high-tax states. 

However, there’s now a $40,000 SALT deduction limit for 2025. The cap increases by 1% yearly through 2029, and reverts to $10,000 in 2030.

Those affected can “capitalize on that extra $30,000 SALT deduction” for 2025, according to certified financial planner Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts. He is also a certified public accountant.

If you’re itemizing tax breaks and impacted by the higher SALT deduction for 2025, here are some key things to know.

Higher earners need to know the SALT deduction phaseouts, or benefit reductions, once modified adjusted gross income, or MAGI, exceeds certain thresholds, experts say.

For 2025, the $40,000 SALT deduction limit starts to decrease when MAGI passes $500,000, and the tax break drops to $10,000 once MAGI hits $600,000.

However, if your earnings fall between $500,000 and $600,000, the phaseout creates what some experts are calling a “SALT torpedo,” or artificially high federal tax rate of 45.5%. 

“When people start actually crunching numbers, they might be in for some surprises,” Andy Whitehair, a CPA and a director with Baker Tilly’s Washington tax council practice, previously told CNBC.

Before 2018, the SALT deduction was unlimited. But the so-called alternative minimum tax reduced the benefit for some higher earners. 

Trump enacted the $10,000 SALT cap late in December 2017, which was effective in 2018. The legislation prompted some filers to prepay 2018 property taxes by year-end 2017 to use more of the unlimited SALT deduction.

For certain taxpayers, a similar “lumping” strategy could make sense for 2025, according to CFP Abigail Rose, director of tax planning for Keeler & Nadler Family Wealth in Dublin, Ohio.

“Maybe we can double pay property taxes in one year,” which could bring you closer to claiming the full $40,000 deduction, said Rose, who is also a CPA.

If you owe quarterly estimated taxes for self-employment, small business income or investment earnings, you could also consider making your fourth-quarter state income tax payment by Dec. 31, Guarino said.

For 2025, the federal fourth-quarter estimated tax deadline is Jan. 15, 2026, and many states have similar due dates, Guarino said.

When combining property and state income tax, reaching “the $40,000 level isn’t much of a stretch” for the SALT deduction, he said.