Congress recently passed the One, Big, Beautiful Bill Act (OB3) in July 2025, and it brings a major change that could provide tax planning opportunities for real estate investors and owners. The law raises the federal SALT (state and local tax) deduction cap from $10,000 to $40,000 through 2029. This is a big win for many taxpayers in states with high property taxes, such as New Jersey, New York, California, and Connecticut.
At the same time, the standard deduction made permanent under the TCJA has been adjusted slightly upward to $15,750 for single filers and $31,500 for joint filers. With the higher SALT cap, many homeowners who once had no choice but to take the standard deduction may now find itemizing more beneficial.
There are a few limits to keep in mind. The higher SALT deduction begins to phase out once your income passes $500,000 of modified adjusted gross income (MAGI). By the time income reaches $600,000, the deduction drops back toward the original $10,000. The same rules apply across filing statuses, except for married filing separately, where the limits are cut in half. Unless Congress acts again, the cap reverts to $10,000 in 2030.
Who benefits most?
Middle- and upper-middle-income homeowners in high-tax states (i.e., CA & NY) stand to gain the most. In fact, in some metro areas, nearly half of homeowners pay more than $10,000 in property taxes each year. The expanded deduction offers these households a chance to lower their federal tax bill – provided they are not phased out due to higher income levels. The OB3 offers several other tax planning opportunities for real estate investors.
Planning opportunities to consider
Now is a good time to revisit your deduction strategy. With the higher SALT cap, it may make sense to:
- Reevaluate whether itemizing gives you a better result than taking the standard deduction
- Bundle charitable contributions into one year
- Track and maximize medical expenses
- Accelerate deductible expenses where possible
If your income falls near the phaseout range, careful timing of income, capital gains, Roth conversions, or bonuses could also help you stay under the threshold and keep more of the deduction.
As always, good records will be key. The phaseout also creates hidden higher tax rates for households in the $500,000–$600,000 income range, making proactive planning especially important.
If you would like to discuss how these changes may impact your personal situation, please reach out to us. We are here to help you review your options and make sure you take advantage of every opportunity.
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