Major SALT Cap Increase: A Big Win for California Homeowners, Creators & Small Business Owners
Big news for Californians — starting in 2025, homeowners, freelancers, and business owners in high-tax states like California can finally breathe a little easier. Under new federal tax rules, the SALT (State and Local Tax) deduction cap will jump from $10,000 to $40,000 for households with modified adjusted gross income (MAGI) up to $500,000. For those earning between $500K–$600K, the deduction phases out by 30% of the excess. Above $600K MAGI, it reverts to the standard $10,000 cap.
This means you may now deduct up to $40,000 in combined state income taxes, property taxes, and other eligible local taxes — plus mortgage interest, business expenses, and other itemized deductions. The increased cap holds for tax years 2025–2029, with a slight annual adjustment of about 1%, then returns to $10,000 in 2030 unless Congress extends it.
Who Benefits Most?
For years, the $10,000 SALT cap has hit Californians hard. Many of our clients — from YouTubers, Shopify store owners, Amazon sellers, and TikTokers to doctors, dentists, tradespeople, beauty salons, equipment rental companies, and other local businesses — have felt forced to choose between writing off state income taxes or high property taxes. Now, you can likely deduct both, which can mean thousands more in your pocket if you itemize instead of taking the standard deduction.
How It Works
✔️ New Limit: Up to $40,000 in SALT deductions for joint filers
✔️ Income Limit: Applies in full for households earning up to $500,000; phases out between $500K–$600K
✔️ Timeline: Covers 2025–2029, then reverts to $10,000 in 2030 unless extended
✔️ Itemize to Benefit: You must itemize deductions to claim the higher cap — so your combined deductions must be greater than the standard deduction (which for 2025 is projected around $31,500 for married joint filers, $15,750 for single filers)
What You Need to Know
| Consideration | Details |
| Itemize vs Standard | Run the numbers: for many creators and small businesses in California, itemizing with the higher SALT cap could save far more than taking the standard deduction. |
| MAGI Phase-Out | Example: If your MAGI is $550K, your SALT cap becomes $40K minus 30% of the $50K overage — so you’d have a $25K cap instead of $40K. Over $600K MAGI, the cap drops back to $10K. |
| Timing | Applies to 2025 tax returns (filed in early 2026), effective through 2029, adjusted slightly upward each year for inflation. |
Tax Planning Strategies for Creators & Small Business Owners
Here’s how our clients — YouTubers, Shopify sellers, Amazon businesses, filmmakers, dental practices, TikTokers, and other service businesses — can plan smartly:
1️. Check if Itemizing Beats the Standard Deduction
Run a projection for 2025–2029. For many high-income creators and homeowners in California, the expanded SALT deduction makes itemizing worth it again.
2️. “Bunch” Expenses to Maximize Deductions
When possible, consider prepaying property taxes or estimated state taxes to stack deductions in higher-income years.
3️. Manage Income Timing
If your income fluctuates, you may want to defer or accelerate income to keep your MAGI under key thresholds.
4️. Combine Other Deductions
Pair the expanded SALT cap with your mortgage interest, charitable donations, medical expenses, and eligible business write-offs to push your itemized total higher.
Bottom Line for California Filmmakers, Online Sellers & Professionals
The One Big Beautiful Bill Act temporarily boosts the SALT deduction cap for tax years 2025–2029 — a significant break for high-tax states like California. If you’re a YouTuber, Shopify store owner, Amazon seller, filmmaker, dentist, tradesperson, or run any local or online business with high state and property taxes, this is your chance to plan ahead, reduce taxable income, and keep more of what you earn.
Smart tax planning can easily add up to thousands saved — but only if you prepare. Make sure your bookkeeping is tight, your income is structured wisely, and your deductions are maximized for this window.
For more information about our tax planning services, contact us today: visit our website.
Velin & Associates, Inc
8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.