The state and local tax (SALT) deduction allows taxpayers who itemize deductions on their federal tax returns to deduct state and local taxes paid from their federal taxable income. This includes Minnesota state income tax, local property tax, and certain sales taxes. Thanks to a recent change made by the One Big Beautiful Bill Act (OBBBA), taxpayers may see a significantly larger SALT deduction for the 2025–2029 tax years. Continue reading to learn how the increased SALT deduction cap could affect your taxes.

How the SALT Cap Changed Under the One Big Beautiful Bill Act

Previously, under the 2017 Tax Cuts and Jobs Act (TCJA), the SALT deduction was capped at a maximum of $10,000 – or $5,000 if married filing separately. That limit applied to state and local income, property, and sales taxes combined, no matter how much you actually paid. Taxpayers, especially those in high-tax states like Minnesota, saw limited benefit from the SALT deduction before 2025.

The One Big Beautiful Bill Act, passed by Congress and signed into law in 2025, has significantly raised the SALT deduction cap for tax years 2025–2029. This change has created better opportunities for many taxpayers to take advantage of federal tax savings. Major changes related to the OBBBA are:

  • The SALT deduction cap has been raised from $10,000 to $40,000 – or $20,000 if married filing separately.
  • Beginning in 2026, the cap increases annually by about 1% per year through 2029.
  • If your modified adjusted gross income (MAGI) exceeds certain thresholds, your allowable SALT deduction may begin to phase down, though it generally won’t fall below the former $10,000 cap.

How the New SALT Deduction Cap Affects Minnesota Taxpayers

Minnesota residents pay both state income tax and local property taxes – a combination that pushed many families above the old $10,000 SALT cap. With the new $40,000 cap, more of those taxes become deductible at the federal level, which could substantially reduce your taxable income.

With the SALT cap higher from 2025 through 2029, some Minnesota taxpayers may find it worthwhile to prepay state or local taxes in one year. A thoughtful tax planning strategy now can help you capture more value from the increased SALT cap. Remember that you must still itemize deductions to take advantage of the SALT deduction because it won’t help if you take the standard deduction.

If you and your spouse have a modified adjusted gross income over the new thresholds, the SALT deduction increase may be phased down toward $10,000. High-income Minnesota residents can still benefit from the new SALT deduction cap by relying on tax planning strategies, such as timing deductions or bunching property tax payments.

Tax Planning Tips Related to the SALT Deduction

  • Review your 2025-2029 tax strategy with a professional tax advisor in the Twin Cities. Determine if itemizing makes sense with the expanded SALT deduction cap in effect.
  • If you anticipate high property taxes or state taxes, there may be timing opportunities to accelerate or defer payments. This can maximize your SALT deduction in a year when it’s most valuable.
  • If you’re a high-income taxpayer, evaluate how the SALT deduction phase-down impacts you and plan your other deductions accordingly.

Navigate SALT Deduction Changes with DHA CPAs

The increased SALT deduction cap can lower federal taxable income and create greater tax savings for many taxpayers in Minnesota. Contact DHA CPAs today if you’d like to discuss tax strategy for upcoming filing seasons.