The SALT Relief That Doesn't Reach High Earners

The SALT deduction cap quadrupled earlier this year, from $10,000 to $40,000, retroactive to 2025. That sounds like relief. For most high earners, it isn't.

The expanded cap phases out based on income. Once your modified AGI crosses $500,000, the cap shrinks. By $600,000, it's back to $10,000. If you're a tech executive, founder, or VC in California or New York, you're probably past both thresholds once you factor in equity comp or capital gains.

The expanded cap also isn't permanent. It reverts to $10,000 in 2030, so even for earners in the phaseout range, the window is narrow.

For years when income is flexible — say you can control the timing of a stock sale or defer a bonus — managing MAGI below $500,000 could preserve more of the expanded deduction. That's not always possible, but in years where it is, it's worth modeling.

This matters more in California and New York than almost anywhere else. Between a 13.3% top state income tax rate in California (or 10.9% in New York, plus city tax) and property taxes on high-value homes, total state and local tax bills for this income bracket can easily run six figures. The SALT deduction is supposed to offset some of that. At a $10,000 cap, it offsets almost none of it.

What actually works for high earners hasn't changed — PTE elections in California and New York can still bypass the cap for business income. But regardless of strategy, it's worth running the numbers. The cap you qualify for may look very different from the one in the headlines.

For educational purposes only. Not tax, legal, or investment advice.