The SALT deduction, which allows taxpayers to deduct state and local taxes from their federal taxable income, has been temporarily increased under Trump's tax legislation. Starting in 2026, the limit will be $40,400, up from $10,000 in 2024, and will continue to increase annually until reverting to $10,000 in 2030.
This change primarily benefits upper-middle to upper-income earners, particularly in high-tax states like California and New Jersey, where taxpayers have reported larger refunds. To maximize the SALT deduction, taxpayers may consider strategies such as bunching itemized deductions or making additional tax payments before the end of the year.
However, higher-income earners should be aware of the 'SALT torpedo,' which phases out the deduction for modified adjusted gross incomes exceeding $505,000, leading to an effective tax rate increase for those near the threshold. Financial planners recommend careful income projections and strategic tax planning to navigate these changes effectively