tax · 2026-05-01
Quantify the federal tax loss from the $10,000 State and Local Tax (SALT) deduction cap — comparing actual paid vs deductible cap.
| State + local property tax | $12,000 |
| State income tax (or sales tax) | $9,000 |
| Federal marginal rate % | 32% |
| Filing status | Single (or MFJ): $10,000 cap |
| Total SALT paid | $21,000 |
| Deductible portion | $10,000 |
| Disallowed SALT | $11,000 |
The 2017 Tax Cuts and Jobs Act capped the State and Local Tax (SALT) deduction at $10,000 ($5k for married filing separately). Before TCJA, state income tax + property tax was fully deductible against federal AGI. The cap is set to expire after 2025 — but politics may extend.
For a NJ homeowner paying $14k property tax + $11k state income tax = $25k SALT, only $10k is deductible. $15k disallowed × 32% federal marginal rate = $4,800/yr lost vs the pre-TCJA world.
TCJA SALT cap is scheduled to sunset after 2025. If Congress lets it lapse, full SALT deductibility returns. Most likely scenarios: (a) full extension of cap, (b) cap raised to $20-40k, (c) cap eliminated. Plan filings as if status quo continues; pivot when legislation finalizes.
Pre-cap (before 2018), prepayment was a common move. Post-cap: prepayment doesn't help — you're still capped at $10k regardless. Some taxpayers tried prepaying 2018 taxes in 2017 to dodge cap; IRS limited this to assessments already issued. Don't bother prepaying just to game the cap; doesn't work.
Doesn't exist — SALT cap is per individual return, not per property. Adding a second home actually hurts: more property tax against the same $10k cap. The PTE tax workaround (passing-through state tax via LLC/S-corp) is the only meaningful structure for high-earners; consult tax counsel.