What owners and would-be buyers should know about the increased SALT deduction cap
- The One Big Beautiful Bill Act increases the SALT cap to $40,000 for those who earn under $500,000
- If your income exceeds $500,000, the cap is gradually reduced by 30 percent until it reaches $10,000
While some owners will write off an additional $30,000, the SALT cap increase doesn't appear significant enough to encourage potential buyers to get off the fence and into the real estate market.
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The Trump administration’s One Big Beautiful Bill Act temporarily increases the federal deduction limit for State and Local Tax (SALT), which includes income and property taxes, to $40,000 from $10,000 for taxpayers who itemize their returns.
While this means some owners will write off an additional $30,000, the increase doesn't appear significant enough to encourage potential buyers to get off the fence and into the real estate market.
The SALT cap has a 1 percent yearly increase through 2029 before reverting back to $10,000 in 2030. In 2029, the SALT deduction limit will be $41,624.
Addressing SALT was a contentious part of OBBBA’s passage earlier this month. House Republicans from high-tax states wanted to double or even remove the SALT cap. In the end, the Senate version of the bill raised the SALT cap for individuals who itemized their deductions to $40,000.
Who can take a SALT deduction?
The increased SALT limit may be a reason to itemize your deductions instead of claiming a standard deduction.
The new limit applies to incomes under $500,000 ($250,000 for those who are married and filing separately). If your modified adjusted income (MAGI) exceeds $500,000, then the cap is gradually reduced by 30 percent until it reaches $10,000.
Nice, but not enough
Ari Harkov, a broker at Brown Harris Stevens, doesn’t see the new SALT limit having much of an impact on the NYC real estate market, but it may help some individuals.
“The extra $30,000 write off could possibly help a co-op buyer. Getting a third back—$9,000 or $10,000—is lovely,” he said. But it is not enough to shift the market in a major way.
'Get SALT back’
The response from NYC owners and would-be buyers seems muted. Harkov said he’s not hearing a peep about SALT from his clients; they’re more concerned with the potential outcome of the mayoral race.
But SALT has been a major pain point for New Yorkers since the first Trump administration, which created the $10,000 ceiling through the 2017 Tax Cuts and Jobs Act. Prior to that, taxpayers were be able to deduct 100 percent of their SALT on their federal income tax returns.
Trump had vowed he would "get SALT back" in a 2024 Truth Social post.
“The SALT cap has hurt people in high-income states like New York where income and property taxes are high,” said Michele Lazzara, CPA and managing director at CBIZ Advisors.
The new limit helps a little, she said.
“New Yorkers pay such high-income tax rates, and plus buyers pay many real estate taxes and fees on top of that, so a small benefit is welcome,” Lazzara said.
PTET for high earners
It might seem a bit unreal to us mere mortals, but plenty of New Yorkers earn above $500,000—and they buy and invest in big real estate deals. This cap doesn’t do anything for them.
“If you live in NYC and earn $500,000, assuming married, filing jointly, your NYS/NYC income tax is roughly $49,000, which is more than the SALT cap,” said Matthew Foreman, a partner at Falcon Rappaport & Berkman and co-chair of the firm’s taxation practice group.
New Yorkers with a partnership or New York S corporation generally opt to take the Pass-Through Entity Tax, which was enacted in 2021. While this is a tax for a business entity, it provides a credit on personal income taxes.
New Yorkers earning above $500 will continue to opt for the PTET workaround, Foreman said. OBBBA did not impose any new restrictions on PTET.
What unlimited SALT would look like
NYC Comptroller Brad Lander previously estimated the impact of eliminating the SALT in today’s dollars. In this scenario, NYC households would stop paying around $7.5 billion in federal taxes.
Of that $7.5 billion, about $7 billion is paid by households that make $200,000 or more per year, he added.
“If people wind up with more money in their pocket because they're not paying as much federal government in taxes thanks to the SALT cap being raised or eliminated—and if tax rates decline overall—then you might see people who would have more to spend on housing,” Lander previously said.
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