If you make a higher income and live in a high-tax state (such as California), you’ve probably bumped into the $10,000 “SALT cap” limitation (“SALT” stands for “State and Local Income Tax”).
This SALT cap limitation has, in recent years, severely restricted the ability for homeowners to deduct, for example, the full amount of their real estate taxes that they pay. Although not a direct “tax increase” on homeowners, this limitation has in fact raised taxes on homeowners, by disallowing a lot of their deductions.
The good news for homeowners (and high-income earners, in general) is that the new tax law has increased the SALT cap to $40,000 instead of $10,000. Some details here for you about a few new tax considerations for homeowners and higher income clients:
👉 SALT Cap Raised to $40,000
That’s right, the cap on state and local tax deductions has quadrupled. If your income is under $500,000 (MFJ) or $250,000 (all others), you could now deduct up to $40,000 in state and local taxes on Schedule A. Above those amounts, the deduction may “phase down” (i.e. meaning, get reduced little by little as your income goes higher).
👉 Remote Work State Tax Rules Still a Maze
Working from a different state than your employer? Traveling often for work? The rules are still complicated—and vary by state. Some states may tax you just for working there a day or two. States are getting more “vigilant” in trying to collect taxes from other state residents who may have some kind of “tie” to their state. Please mention this to your Easy Tax Service Professional if multi-state tax issues are a concern for you.
👉 More Scrutiny Coming for High-Income Returns?
While audit rates for higher income clients are still low (for now) in comparison to historical averages, enforcement tools are improving. The IRS is creating and implementing innovative technologies (AI, etc.) intended to help them collect more taxes. High earners should absolutely be proactive, not reactive, in protecting against more IRS scrutiny.
Interested in reducing your tax burden in 2025 and beyond? Our tax reduction consulting service is designed to help you take full advantage of recent changes in tax law. To schedule a meeting with an Easy Tax Service Professional, please call 928-775-7000 Ext 0 and speak with our receptionist.