As 2025’s second property tax installment lands, there’s a tax change worth celebrating: the SALT deduction cap is getting a major boost. Whether you’re a longtime homeowner in San Francisco or advising friends and family on real estate decisions, this could have a significant impact.
What Is the SALT Deduction?
“SALT” stands for State and Local Tax deduction. In the context of federal income taxes, it allows homeowners (and other taxpayers) who itemize their deductions to subtract what they paid in:
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State and local income tax
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Property (real estate) taxes
- (Sometimes certain other local taxes)
Before 2018, there was no cap, but the 2017 Tax Cuts and Jobs Act (TCJA) changed that — limiting SALT deductions to $10,000 (or $5,000 if married filing separately).
What’s Changing in 2025
Thanks to the newly passed “One Big Beautiful Bill Act” (OBBB), there are big updates:
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SALT cap increases to $40,000 for tax year 2025 (was $10,000) for most taxpayers; $40,000 for single, head of household and married couples filing jointly and a limit of $20,000 for individuals filing separately.
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This boost is temporary: from 2026 to 2029, the cap increases by about 1% each year, then reverts back to $10,000 in 2030 (once MAGI, otherwise known as modified adjusted gross income, reaches $600,000).
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There’s an income-based phaseout: for MAGI over $500,000 ($250,000 for married filing separately), the $40K cap is reduced at a rate of 30% of the amount above that threshold.
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Even with the higher cap, some very high-income taxpayers (above a certain threshold) may still end up with a lower effective cap.
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Crucially: you must itemize deductions on your federal return to benefit from SALT. If you take the standard deduction, you’re out of luck.
Why This Matters for Homeowners in San Francisco
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Higher Tax Relief Potential: In a high-cost area like the Bay Area, property taxes can be substantial. Increasing the SALT cap means more of that is potentially deductible, which could translate to thousands in savings for some households.
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More Strategic Tax Planning: This change opens up more leverage for tax planning — whether that’s timing payments, itemizing, or revisiting financial strategies with your CPA.
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Real Estate Decisions: If you’re buying, selling, or refinancing, this SALT cap change may shift how you think about the cost of property ownership.
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Temporary Window: Because the cap reverts in 2030, there may be a limited window (2025–2029) where the full benefit applies. That timing could matter — especially for long-term financial planning.
Things to Watch & Next Steps
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Talk to Your Accountant or Tax Advisor: This is not one-size-fits-all. Your individual tax situation (income, other deductions, itemizing vs. standard deduction) will determine how much you benefit.
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Keep Good Records: Make sure you track both property tax payments and state/local tax payments.
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Consider Timing: There may be strategy around when to pay or “bunch” some taxes to maximize the benefit within the five-year window.
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Factor Into Real Estate Planning: Whether you're advising on a home purchase or sale, or advising clients, this change could materially impact the net cost of owning.
Bottom Line
Yes, this is a big deal — especially for homeowners in high-tax states like California. While not everyone will get the full benefit (thanks to income phaseouts), many could find themselves in a much better position than under the old rules.
If you want to explore how this specifically affects you, your mortgage, or your real estate goals, I’d be happy to chat. Call or message me anytime!