One Big Beautiful Bill Part 2
October 4, 2025 Author: Compass Pointe CPAs
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into legislation. While the OBBBA primarily extends many existing tax provisions, it also introduces several new and notable updates. As part of our ongoing series, we would like to provide our clients with commentary and analysis on these new tax planning topics. Below is Part 2 of this series.
PART 2: State and Local Tax (SALT) Deduction
Starting in tax year 2025, the SALT deduction cap associated with itemized deductions increases from $10,000 to $40,000. The limit phases out for most taxpayers with Modified Adjusted Gross Income (MAGI) in excess of $500,000 – reducing to the previously established limit of $10,000 once MAGI hits $600,000 and above.
Practical Analysis
For many taxpayers under the MAGI phase out limits, this increased limit may provide a natural “shot in the arm” – for example, a taxpayer who has historically paid $40,000 in state and local taxes (through payroll withholdings, real estate taxes, etc.) has been limited to $10,000 under previous legislation – but for 2025, that same scenario would provide a $40,000 SALT deduction on Schedule A – Itemized Deductions.
