WEBVTT
00:00:15.279 --> 00:00:17.760
Welcome back to another episode of the Wealth Cafe.
00:00:17.839 --> 00:00:23.280
As always, I am Caroline Tannis, lead financial advisor and founder of Tannis Financial Group.
00:00:23.519 --> 00:00:28.719
Let me tell you something that happened a lot during the year 2018.
00:00:28.960 --> 00:00:39.840
High-earning women and their families across New York, New Jersey, California, they sat down with their accountants to do their taxes for the first time under a new set of rules.
00:00:40.079 --> 00:00:41.759
A lot of them were blindsided.
00:00:41.920 --> 00:00:56.880
Women and their families who had been deducting 30,000, 40,000, in some cases even 50,000 in state and local taxes every year suddenly discovered that their deductions had been capped at$10,000, no exceptions.
00:00:56.960 --> 00:00:58.000
There was no phase-in.
00:00:58.399 --> 00:01:09.760
The tax jobs cuts in act of 2017 had quietly handed high earners and high tax states one of the largest effective federal tax increases in decades.
00:01:09.920 --> 00:01:18.640
And most people didn't fully realize it until they filed for eight years, eight tax years that$10,000 cap held.
00:01:18.719 --> 00:01:19.599
And it didn't move.
00:01:19.760 --> 00:01:33.760
It didn't adjust for inflation while property taxes continued to rise, while state income taxes went up, and while the salt burden for women and their families in this audience grew year over year, the federal deduction stayed at that 10 grand.
00:01:34.159 --> 00:01:38.000
However, this has changed officially as of July 4th, 2025.
00:01:38.239 --> 00:01:49.840
The One Big Beautiful Bill Act raised the salt deduction cap from 10,000 to 40,000 for 2026, effective across tax years 2025 through 2029.
00:01:50.079 --> 00:01:58.319
Now, for many of the listeners in this audience, this is the single largest federal tax benefit that they have received in honestly nearly a decade.
00:01:58.719 --> 00:02:01.760
But here is where the headlines missed.
00:02:01.920 --> 00:02:05.680
That$40,400 cap is not available to everyone.
00:02:05.840 --> 00:02:13.439
It actually phases out for high earners in a way that matters enormously if your income is near or above$500,000.
00:02:13.680 --> 00:02:19.199
And that whole thing sunsets in 2030, meaning you have a window to benefit from this.
00:02:19.360 --> 00:02:21.759
And that window, it's not unlimited.
00:02:21.919 --> 00:02:26.319
Today I want to give you the full picture, not just the good news headline.
00:02:26.479 --> 00:02:32.240
This is the complete story so you can actually use it before we, well, potentially lose it.
00:02:32.479 --> 00:02:34.479
Let me give you the numbers clearly so you have them.
00:02:34.639 --> 00:02:38.400
For 2026, the federal salt deduction cap is 40,400.
00:02:38.479 --> 00:02:43.759
For most filers, that is, that is for individuals, married couples filing jointly, and head of households.
00:02:43.840 --> 00:02:48.879
If you are married filing separately, however, it is 22,200.
00:02:49.199 --> 00:02:53.280
The cap will increase by 1% per year through 2029.
00:02:53.360 --> 00:02:57.840
So it will be approximately 40,804 in 2027 and so on.
00:02:58.000 --> 00:03:03.520
But after 2029, it's reverting to that$10,000 unless Congress acts to extend it.
00:03:03.680 --> 00:03:14.879
For a lot of the families that benefit and most of those with household incomes, roughly between$200,000 and$500,000 who itemize deductions and have significant state and local tax exposure.
00:03:15.039 --> 00:03:18.960
This is a large portion of the listeners in this audience.
00:03:19.039 --> 00:03:38.000
Now, if you own a home, for example, in New Jersey, where I live, where the average property taxes are around rates of 2.2 of assessed value, and you have a meaningful state income tax from salary, bonus, or investment income, your true salt bill may easily be$25,000 to$40,000 or even more.
00:03:38.240 --> 00:03:41.840
Under the old rules, you could only deduct$10,000 of that.
00:03:42.080 --> 00:03:46.639
Under the new rules, you may be able to deduct the full amount.
00:03:46.879 --> 00:03:58.879
To put that in dollars, if your marginal federal tax rate is$24,000 and you now have$30,000 more in deductions, your federal tax bill drops by approximately$7,200.
00:03:59.199 --> 00:03:59.840
That's real money.
00:03:59.919 --> 00:04:01.039
That could be a vacation.
00:04:01.120 --> 00:04:04.879
And it is money that has been unavailable for to you for eight years.
00:04:05.199 --> 00:04:09.439
But this is critical and this only matters if you itemize.
00:04:09.680 --> 00:04:15.520
The 2026 standard deduction for married couples filing jointly is actually$32,200.
00:04:15.599 --> 00:04:27.920
And if your total itemized deductions, salt, your mortgage interest, plus any charitable contributions, plus other qualifying expenses don't exceed that$32,000, you are still better off.
00:04:28.079 --> 00:04:33.680
Taking the standard deduction and the increased salt cap helps you honestly with nothing.
00:04:33.920 --> 00:04:39.600
Run the numbers with your accountant before assuming that this benefit will apply to you.
00:04:39.839 --> 00:04:45.519
This is the piece of the salt story that most news coverage got wrong or simply just glossed over.
00:04:45.600 --> 00:04:51.360
And it is the piece that honestly matters most for most of the women that are listening in this audience.
00:04:51.600 --> 00:04:55.839
The$40,400 cap, it's not available at all income levels.
00:04:55.920 --> 00:05:01.839
It is phased out for taxpayers with a modified adjusted gross income above$50,500.
00:05:02.000 --> 00:05:06.959
Now that phase out rate is 30 cents on every dollar of Magi above the threshold.
00:05:07.040 --> 00:05:12.560
So the cap reduces it, but it never drops below$10,000, regardless of your income.
00:05:12.800 --> 00:05:17.600
And the math works like this: the increased portion of the cap is$30,400.
00:05:17.680 --> 00:05:22.480
That's the difference you're gonna see between$40,400 and the old$10,000 floor.
00:05:22.639 --> 00:05:33.199
At a 30% phase out rate, the full benefit disappears after approximately$101,000 of income above that$505K, which is the threshold that we have.
00:05:33.360 --> 00:05:41.680
That means at$606,000,$333,000 of Magi, your effective salt cap goes back to that$10,000, the same as it was before.
00:05:41.920 --> 00:05:43.439
So who does this hit?
00:05:43.600 --> 00:05:52.160
A woman who's earning$550,000 in 2026 from salary, bonus, RSU, investment income, it is squarely in the phase out zone.
00:05:52.240 --> 00:06:01.120
And if you are receiving that partial benefit, not the full$40,400, but more than$10,000, the exact number is going to depend on Magi.
00:06:01.600 --> 00:06:06.000
A woman earning$700,000 receives essentially no benefit at all.
00:06:06.079 --> 00:06:10.079
Her salt cap is going to be$10,000, the same as it was before.
00:06:10.240 --> 00:06:16.160
The salt interaction with capital gains I mentioned in an earlier episode, it's something you need to pay attention to.
00:06:16.240 --> 00:06:21.600
So if you realize a large capital gain this year, that could push your magi above that$505.
00:06:21.680 --> 00:06:25.439
And that gain could reduce your salt deduction simultaneously.
00:06:25.600 --> 00:06:30.879
Every dollar of capital gains in that phase out range costs you not just the capital gains tax.
00:06:31.120 --> 00:06:35.839
It also costs you 30 cents of additional salt deduction that is lost.
00:06:36.079 --> 00:06:41.040
Modeling the interaction before realizing gains, it is essential to do.
00:06:41.279 --> 00:06:47.759
This is exactly why your tax picture needs to be analyzed historically, not just one piece at a time.
00:06:48.000 --> 00:06:54.879
The salt crap increase is genuinely meaningful, but it's got that expiration date and the income ceiling.
00:06:54.959 --> 00:06:59.519
So treating it like it's a permanent universal benefit is a clear mistake.
00:06:59.680 --> 00:07:10.879
And treating it as a time-limited window to maximize your deduction when it's available, that is a true planning opportunity you need to be taking advantage of with your financial team.
00:07:11.040 --> 00:07:13.680
Let's break down some strategies that are worth knowing.
00:07:13.839 --> 00:07:17.680
Strategy number one is confirm whether or not you should be itemizing in 2026.
00:07:17.839 --> 00:07:18.800
The first step is simple.
00:07:18.959 --> 00:07:25.279
Add up your salt deduction, mortgage interest, any charitable contributions, and any other itemized deductions.
00:07:25.519 --> 00:07:34.319
If the total exceeds more than$32,200 for a married coupling filing jointly, itemizing will save you money compared to the standard deduction.
00:07:34.480 --> 00:07:44.959
Now, for many women in high tax states with mortgages and charitable giving, the math now clearly favors itemizing in a way that it may not have since 2017.
00:07:45.199 --> 00:07:51.920
Strategy number two, if you are a business owner or partner, ask about the pass-through entity tax.
00:07:52.079 --> 00:07:57.839
Now, this is called the PTET, the pass-through entity tax, and it is a strategy that it's only available in 36 states.
00:07:58.000 --> 00:08:10.240
However, if you are in one of these higher tax states like New Jersey or New York, that allows a partnership and an S corporation to pay state income tax at the entity level rather than at the individual level.
00:08:10.399 --> 00:08:16.800
The entity is going to deduct the state tax as a business expense completely outside the individual salt cap.
00:08:17.199 --> 00:08:29.839
Now, for business owners with income above the$505,000 phase out threshold who receive no benefit from the salt cap, increase the PTAT often is a more powerful tool to use.
00:08:30.000 --> 00:08:39.360
Importantly, the one big beautiful bill did not eliminate this workaround, even though earlier versions of the bill they tried to attempt to, but it didn't pass.
00:08:39.440 --> 00:08:40.639
And it remains available.
00:08:40.720 --> 00:08:49.679
So if you own a pass-through business and you haven't discussed this option with your accountant, this is a conversation that should happen before year end.
00:08:50.000 --> 00:08:53.360
Strategy number three, modeled out the years ahead.
00:08:53.519 --> 00:08:55.360
The window is closing in 2030.
00:08:55.440 --> 00:09:02.000
So the salt cap increase is going to run through 2029 and it's going to revert to that$10,000 in 2030.
00:09:02.240 --> 00:09:13.919
If you have timing discretion over any state tax payments, property tax payments, accelerating deductible expenses, the four-year window to maximize your salt deduction is right now.
00:09:14.399 --> 00:09:20.080
This is especially relevant if your 2030 and beyond income picture looks pretty similar.
00:09:20.320 --> 00:09:32.720
A CPA who is proactively modeling your 2026 through 2029 salt deduction, not just filing for your current year taxes, but should be giving you real planning value, should help model this out for you.
00:09:32.960 --> 00:09:34.480
I want to tell you about a client.
00:09:34.639 --> 00:09:37.679
Her name has been changed to Christine to protect her identity.
00:09:37.840 --> 00:09:44.000
At 59, she spent 30 years as a litigator at a large law firm starting her own practice seven years ago.
00:09:44.159 --> 00:09:51.120
She owns a home in Summit, New Jersey, where property taxes are through the roof, and hers are approximately$22,000 a year.
00:09:51.360 --> 00:09:55.440
She pays around$28,000 in New Jersey state income tax in most years.
00:09:55.600 --> 00:09:59.440
Her combined salt before the cap is roughly$50,000.
00:09:59.840 --> 00:10:07.200
And since 2018, her federal deduction for all that has been$10,000 every single year.
00:10:07.440 --> 00:10:09.200
Here was the conversation we had.
00:10:09.360 --> 00:10:14.320
When I reviewed her 2025 tax situation, this was the first year that the new cap applied.
00:10:14.399 --> 00:10:19.679
So she could now deduct up to$40,000 of her salt deduction.
00:10:19.840 --> 00:10:22.720
This is$30,000 more in salt deductions.
00:10:22.960 --> 00:10:27.840
And her accountant had filed it, but she didn't mentally know that this change had occurred.
00:10:27.919 --> 00:10:34.559
And at her income level, her practice is generating around$420,000 in net income in most years.
00:10:34.720 --> 00:10:38.960
So she's below that$505,000 Magi phase out threshold.
00:10:39.039 --> 00:10:45.759
So she's going to get that full$40,400 applied to her 32% marginal tax rate.
00:10:45.840 --> 00:10:57.840
That's an additional$30,400 in salt deductions, reducing her federal tax bill by approximately$9,728 every year for as long as this rule will hold up.
00:10:58.080 --> 00:10:59.279
Here's what changes.
00:10:59.440 --> 00:11:01.679
Her law practice is structured as an S-Corp.
00:11:01.840 --> 00:11:18.320
So we discussed between her, myself, and the CPA, New Jersey and the PTET election, allowing the S-Corp to pay the state income tax at the entity level and deduct it as a business expense for any year where her income approaches or exceeds that$505,000.
00:11:18.720 --> 00:11:23.919
And this strategy would protect her salt benefit regardless of the individual phaseout.
00:11:24.159 --> 00:11:32.159
Through this strategy, we were able to talk about it from each angle and brought the entire financial team together, looked at it from a new perspective.
00:11:32.399 --> 00:11:35.360
As always, let's break down our three actions to do from here.
00:11:35.600 --> 00:11:40.399
Action number one is I want you to call your accountant and ask a very specific question.
00:11:40.639 --> 00:11:43.440
Should I be itemizing for the year 2026?
00:11:43.600 --> 00:11:45.759
And at this point, you should have a pretty good idea.
00:11:45.840 --> 00:11:49.519
And if so, what is the actual salt deduction you'll be able to take?
00:11:49.679 --> 00:11:54.240
This isn't just a, hey, does the new cap help me, but can you take the full deduction?
00:11:54.480 --> 00:12:01.039
Your salt bill, your mortgage interest, your charitable giving, and whether the itemized total is going to be that standard deduction.
00:12:01.200 --> 00:12:11.759
And if the answer is yes and you haven't been itemizing, your accountant should be going back and reviewing the past tax year since 2025 to make sure that you are capturing the full benefit.
00:12:11.840 --> 00:12:21.360
And if your income is near that 500,000, ask specifically about the phase out and whether the PTET is a better approach for your situation.
00:12:22.559 --> 00:12:35.600
Action number two, if you own a pass-through business, so an S-Corp, a partnership, an LLC taxes, a partnership, ask about the New Jersey or the New York PTET election before year end.
00:12:35.759 --> 00:12:38.399
This is a timing sensitive decision.
00:12:38.559 --> 00:12:47.600
PTET elections often need to be made and payments submitted before December 31st in order to be deductible in the current tax year.
00:12:47.759 --> 00:12:54.720
So if you have not had this conversation with your accountant yet, have it this month, not December.
00:12:54.879 --> 00:12:56.480
October is the time to do it.
00:12:56.720 --> 00:13:03.759
Action number three is model out your salt deduction for 2027, 2028, and 2029, not just 2026.
00:13:03.919 --> 00:13:07.279
That salt cap increase is a four-year window.
00:13:07.440 --> 00:13:17.440
And if your state and local taxes are consistently high, the cumulative value of maximizing your salt deductions over four years can be substantial.
00:13:17.679 --> 00:13:31.519
Ask your accountant and say, given that this reverts in 2030, is there anything that I should or could be doing 2026 through 2029 to accelerate or optimize my salt deduction in the window while it's open?
00:13:31.679 --> 00:13:36.799
And if the answer is no, at least you have that peace of mind going forward.
00:13:37.120 --> 00:13:46.000
For eight years, women and their families who were in high tax states have been paying federal tax penalties for where they chose to live or had to because of work.
00:13:46.159 --> 00:13:49.120
That penalty has been lifted for four years.
00:13:49.279 --> 00:13:55.039
And the women whose income falls below that phase-out threshold, they have a window that should be used.
00:13:55.200 --> 00:13:56.159
Model it carefully.
00:13:56.240 --> 00:14:06.080
And if your income is above that$500,000, make sure you understand what's available to you through potentially the PTET so you don't miss that benefit entirely.
00:14:06.320 --> 00:14:14.960
If this episode clarified something for you that maybe you've been confused or unsure about since the OBBA passed, please share it with somebody who it would benefit.
00:14:15.120 --> 00:14:23.279
This is exactly the kind of real specific state level planning conversations that most financial teams skip altogether.
00:14:23.519 --> 00:14:27.440
Make sure you're also following so you get every episode the second it drops.
00:14:27.600 --> 00:14:47.679
And if you want to sit down and build out your financial team to model your specific salt situation, your income, your business structure, property taxes, and want your financial advisor and CPA working together, we can fill that financial advisory seat and you can head over to apply for an intro call at tannisfingroup.com slash contact.
00:14:48.000 --> 00:14:52.240
Let's make sure that you are not leaving this deduction or any of them on the table.
00:14:52.399 --> 00:14:55.679
I will see you again next week for another episode of the Wealth Cafe.
00:00:15.279 --> 00:00:17.760
Welcome back to another episode of the Wealth Cafe.
00:00:17.839 --> 00:00:23.280
As always, I am Caroline Tannis, lead financial advisor and founder of Tannis Financial Group.
00:00:23.519 --> 00:00:28.719
Let me tell you something that happened a lot during the year 2018.
00:00:28.960 --> 00:00:39.840
High-earning women and their families across New York, New Jersey, California, they sat down with their accountants to do their taxes for the first time under a new set of rules.
00:00:40.079 --> 00:00:41.759
A lot of them were blindsided.
00:00:41.920 --> 00:00:56.880
Women and their families who had been deducting 30,000, 40,000, in some cases even 50,000 in state and local taxes every year suddenly discovered that their deductions had been capped at$10,000, no exceptions.
00:00:56.960 --> 00:00:58.000
There was no phase-in.
00:00:58.399 --> 00:01:09.760
The tax jobs cuts in act of 2017 had quietly handed high earners and high tax states one of the largest effective federal tax increases in decades.
00:01:09.920 --> 00:01:18.640
And most people didn't fully realize it until they filed for eight years, eight tax years that$10,000 cap held.
00:01:18.719 --> 00:01:19.599
And it didn't move.
00:01:19.760 --> 00:01:33.760
It didn't adjust for inflation while property taxes continued to rise, while state income taxes went up, and while the salt burden for women and their families in this audience grew year over year, the federal deduction stayed at that 10 grand.
00:01:34.159 --> 00:01:38.000
However, this has changed officially as of July 4th, 2025.
00:01:38.239 --> 00:01:49.840
The One Big Beautiful Bill Act raised the salt deduction cap from 10,000 to 40,000 for 2026, effective across tax years 2025 through 2029.
00:01:50.079 --> 00:01:58.319
Now, for many of the listeners in this audience, this is the single largest federal tax benefit that they have received in honestly nearly a decade.
00:01:58.719 --> 00:02:01.760
But here is where the headlines missed.
00:02:01.920 --> 00:02:05.680
That$40,400 cap is not available to everyone.
00:02:05.840 --> 00:02:13.439
It actually phases out for high earners in a way that matters enormously if your income is near or above$500,000.
00:02:13.680 --> 00:02:19.199
And that whole thing sunsets in 2030, meaning you have a window to benefit from this.
00:02:19.360 --> 00:02:21.759
And that window, it's not unlimited.
00:02:21.919 --> 00:02:26.319
Today I want to give you the full picture, not just the good news headline.
00:02:26.479 --> 00:02:32.240
This is the complete story so you can actually use it before we, well, potentially lose it.
00:02:32.479 --> 00:02:34.479
Let me give you the numbers clearly so you have them.
00:02:34.639 --> 00:02:38.400
For 2026, the federal salt deduction cap is 40,400.
00:02:38.479 --> 00:02:43.759
For most filers, that is, that is for individuals, married couples filing jointly, and head of households.
00:02:43.840 --> 00:02:48.879
If you are married filing separately, however, it is 22,200.
00:02:49.199 --> 00:02:53.280
The cap will increase by 1% per year through 2029.
00:02:53.360 --> 00:02:57.840
So it will be approximately 40,804 in 2027 and so on.
00:02:58.000 --> 00:03:03.520
But after 2029, it's reverting to that$10,000 unless Congress acts to extend it.
00:03:03.680 --> 00:03:14.879
For a lot of the families that benefit and most of those with household incomes, roughly between$200,000 and$500,000 who itemize deductions and have significant state and local tax exposure.
00:03:15.039 --> 00:03:18.960
This is a large portion of the listeners in this audience.
00:03:19.039 --> 00:03:38.000
Now, if you own a home, for example, in New Jersey, where I live, where the average property taxes are around rates of 2.2 of assessed value, and you have a meaningful state income tax from salary, bonus, or investment income, your true salt bill may easily be$25,000 to$40,000 or even more.
00:03:38.240 --> 00:03:41.840
Under the old rules, you could only deduct$10,000 of that.
00:03:42.080 --> 00:03:46.639
Under the new rules, you may be able to deduct the full amount.
00:03:46.879 --> 00:03:58.879
To put that in dollars, if your marginal federal tax rate is$24,000 and you now have$30,000 more in deductions, your federal tax bill drops by approximately$7,200.
00:03:59.199 --> 00:03:59.840
That's real money.
00:03:59.919 --> 00:04:01.039
That could be a vacation.
00:04:01.120 --> 00:04:04.879
And it is money that has been unavailable for to you for eight years.
00:04:05.199 --> 00:04:09.439
But this is critical and this only matters if you itemize.
00:04:09.680 --> 00:04:15.520
The 2026 standard deduction for married couples filing jointly is actually$32,200.
00:04:15.599 --> 00:04:27.920
And if your total itemized deductions, salt, your mortgage interest, plus any charitable contributions, plus other qualifying expenses don't exceed that$32,000, you are still better off.
00:04:28.079 --> 00:04:33.680
Taking the standard deduction and the increased salt cap helps you honestly with nothing.
00:04:33.920 --> 00:04:39.600
Run the numbers with your accountant before assuming that this benefit will apply to you.
00:04:39.839 --> 00:04:45.519
This is the piece of the salt story that most news coverage got wrong or simply just glossed over.
00:04:45.600 --> 00:04:51.360
And it is the piece that honestly matters most for most of the women that are listening in this audience.
00:04:51.600 --> 00:04:55.839
The$40,400 cap, it's not available at all income levels.
00:04:55.920 --> 00:05:01.839
It is phased out for taxpayers with a modified adjusted gross income above$50,500.
00:05:02.000 --> 00:05:06.959
Now that phase out rate is 30 cents on every dollar of Magi above the threshold.
00:05:07.040 --> 00:05:12.560
So the cap reduces it, but it never drops below$10,000, regardless of your income.
00:05:12.800 --> 00:05:17.600
And the math works like this: the increased portion of the cap is$30,400.
00:05:17.680 --> 00:05:22.480
That's the difference you're gonna see between$40,400 and the old$10,000 floor.
00:05:22.639 --> 00:05:33.199
At a 30% phase out rate, the full benefit disappears after approximately$101,000 of income above that$505K, which is the threshold that we have.
00:05:33.360 --> 00:05:41.680
That means at$606,000,$333,000 of Magi, your effective salt cap goes back to that$10,000, the same as it was before.
00:05:41.920 --> 00:05:43.439
So who does this hit?
00:05:43.600 --> 00:05:52.160
A woman who's earning$550,000 in 2026 from salary, bonus, RSU, investment income, it is squarely in the phase out zone.
00:05:52.240 --> 00:06:01.120
And if you are receiving that partial benefit, not the full$40,400, but more than$10,000, the exact number is going to depend on Magi.
00:06:01.600 --> 00:06:06.000
A woman earning$700,000 receives essentially no benefit at all.
00:06:06.079 --> 00:06:10.079
Her salt cap is going to be$10,000, the same as it was before.
00:06:10.240 --> 00:06:16.160
The salt interaction with capital gains I mentioned in an earlier episode, it's something you need to pay attention to.
00:06:16.240 --> 00:06:21.600
So if you realize a large capital gain this year, that could push your magi above that$505.
00:06:21.680 --> 00:06:25.439
And that gain could reduce your salt deduction simultaneously.
00:06:25.600 --> 00:06:30.879
Every dollar of capital gains in that phase out range costs you not just the capital gains tax.
00:06:31.120 --> 00:06:35.839
It also costs you 30 cents of additional salt deduction that is lost.
00:06:36.079 --> 00:06:41.040
Modeling the interaction before realizing gains, it is essential to do.
00:06:41.279 --> 00:06:47.759
This is exactly why your tax picture needs to be analyzed historically, not just one piece at a time.
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The salt crap increase is genuinely meaningful, but it's got that expiration date and the income ceiling.
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So treating it like it's a permanent universal benefit is a clear mistake.
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And treating it as a time-limited window to maximize your deduction when it's available, that is a true planning opportunity you need to be taking advantage of with your financial team.
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Let's break down some strategies that are worth knowing.
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Strategy number one is confirm whether or not you should be itemizing in 2026.
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The first step is simple.
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Add up your salt deduction, mortgage interest, any charitable contributions, and any other itemized deductions.
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If the total exceeds more than$32,200 for a married coupling filing jointly, itemizing will save you money compared to the standard deduction.
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Now, for many women in high tax states with mortgages and charitable giving, the math now clearly favors itemizing in a way that it may not have since 2017.
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Strategy number two, if you are a business owner or partner, ask about the pass-through entity tax.
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Now, this is called the PTET, the pass-through entity tax, and it is a strategy that it's only available in 36 states.
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However, if you are in one of these higher tax states like New Jersey or New York, that allows a partnership and an S corporation to pay state income tax at the entity level rather than at the individual level.
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The entity is going to deduct the state tax as a business expense completely outside the individual salt cap.
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Now, for business owners with income above the$505,000 phase out threshold who receive no benefit from the salt cap, increase the PTAT often is a more powerful tool to use.
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Importantly, the one big beautiful bill did not eliminate this workaround, even though earlier versions of the bill they tried to attempt to, but it didn't pass.
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And it remains available.
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So if you own a pass-through business and you haven't discussed this option with your accountant, this is a conversation that should happen before year end.
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Strategy number three, modeled out the years ahead.
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The window is closing in 2030.
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So the salt cap increase is going to run through 2029 and it's going to revert to that$10,000 in 2030.
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If you have timing discretion over any state tax payments, property tax payments, accelerating deductible expenses, the four-year window to maximize your salt deduction is right now.
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This is especially relevant if your 2030 and beyond income picture looks pretty similar.
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A CPA who is proactively modeling your 2026 through 2029 salt deduction, not just filing for your current year taxes, but should be giving you real planning value, should help model this out for you.
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I want to tell you about a client.
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Her name has been changed to Christine to protect her identity.
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At 59, she spent 30 years as a litigator at a large law firm starting her own practice seven years ago.
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She owns a home in Summit, New Jersey, where property taxes are through the roof, and hers are approximately$22,000 a year.
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She pays around$28,000 in New Jersey state income tax in most years.
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Her combined salt before the cap is roughly$50,000.
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And since 2018, her federal deduction for all that has been$10,000 every single year.
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Here was the conversation we had.
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When I reviewed her 2025 tax situation, this was the first year that the new cap applied.
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So she could now deduct up to$40,000 of her salt deduction.
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This is$30,000 more in salt deductions.
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And her accountant had filed it, but she didn't mentally know that this change had occurred.
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And at her income level, her practice is generating around$420,000 in net income in most years.
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So she's below that$505,000 Magi phase out threshold.
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So she's going to get that full$40,400 applied to her 32% marginal tax rate.
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That's an additional$30,400 in salt deductions, reducing her federal tax bill by approximately$9,728 every year for as long as this rule will hold up.
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Here's what changes.
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Her law practice is structured as an S-Corp.
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So we discussed between her, myself, and the CPA, New Jersey and the PTET election, allowing the S-Corp to pay the state income tax at the entity level and deduct it as a business expense for any year where her income approaches or exceeds that$505,000.
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And this strategy would protect her salt benefit regardless of the individual phaseout.
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Through this strategy, we were able to talk about it from each angle and brought the entire financial team together, looked at it from a new perspective.
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As always, let's break down our three actions to do from here.
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Action number one is I want you to call your accountant and ask a very specific question.
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Should I be itemizing for the year 2026?
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And at this point, you should have a pretty good idea.
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And if so, what is the actual salt deduction you'll be able to take?
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This isn't just a, hey, does the new cap help me, but can you take the full deduction?
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Your salt bill, your mortgage interest, your charitable giving, and whether the itemized total is going to be that standard deduction.
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And if the answer is yes and you haven't been itemizing, your accountant should be going back and reviewing the past tax year since 2025 to make sure that you are capturing the full benefit.
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And if your income is near that 500,000, ask specifically about the phase out and whether the PTET is a better approach for your situation.
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Action number two, if you own a pass-through business, so an S-Corp, a partnership, an LLC taxes, a partnership, ask about the New Jersey or the New York PTET election before year end.
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This is a timing sensitive decision.
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PTET elections often need to be made and payments submitted before December 31st in order to be deductible in the current tax year.
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So if you have not had this conversation with your accountant yet, have it this month, not December.
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October is the time to do it.
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Action number three is model out your salt deduction for 2027, 2028, and 2029, not just 2026.
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That salt cap increase is a four-year window.
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And if your state and local taxes are consistently high, the cumulative value of maximizing your salt deductions over four years can be substantial.
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Ask your accountant and say, given that this reverts in 2030, is there anything that I should or could be doing 2026 through 2029 to accelerate or optimize my salt deduction in the window while it's open?
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And if the answer is no, at least you have that peace of mind going forward.
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For eight years, women and their families who were in high tax states have been paying federal tax penalties for where they chose to live or had to because of work.
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That penalty has been lifted for four years.
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And the women whose income falls below that phase-out threshold, they have a window that should be used.
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Model it carefully.
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And if your income is above that$500,000, make sure you understand what's available to you through potentially the PTET so you don't miss that benefit entirely.
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If this episode clarified something for you that maybe you've been confused or unsure about since the OBBA passed, please share it with somebody who it would benefit.
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This is exactly the kind of real specific state level planning conversations that most financial teams skip altogether.
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Make sure you're also following so you get every episode the second it drops.
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And if you want to sit down and build out your financial team to model your specific salt situation, your income, your business structure, property taxes, and want your financial advisor and CPA working together, we can fill that financial advisory seat and you can head over to apply for an intro call at tannisfingroup.com slash contact.
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Let's make sure that you are not leaving this deduction or any of them on the table.
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I will see you again next week for another episode of the Wealth Cafe.
