Don’t Be Salty About Missing Out: Maximizing Your SALT Deduction in 2025
Key Takeaways
Low-Income-Tax State Residents Can Benefit from the Increased SALT Cap: Residents of states without income tax should note the increased $40,000 SALT cap for 2025; they can still benefit by claiming deductions for property taxes and general sales taxes rather than state income taxes.
Tracking Actual Sales Tax Payments Maximizes the Deduction: To maximize the deduction, taxpayers should track their actual sales tax paid on major purchases (like vehicles or home renovations) and add those amounts on top of the baseline deduction provided by the IRS tables.
Itemizing is Key and Requires Strategic Timing: The SALT deduction only provides a benefit if your total itemized deductions exceed the standard deduction; taxpayers should strategically “bunch” deductions by paying 2026 property taxes before the end of 2025 to help meet this itemizing threshold.
If you live in a state without income tax—like Texas, Florida, Nevada, Washington, or Tennessee—you might assume the newly expanded State and Local Tax (SALT) deduction doesn’t apply to you. But that assumption isn’t worth its salt.
Under the One Big Beautiful Bill Act (OBBBA), the SALT deduction cap has increased from $10,000 to $40,000 for the 2025 tax year. While this change has received significant attention in high-tax states, residents of low-tax states—what we’ll call “low-SALT” states—can also benefit by strategically claiming sales tax deductions instead of state income tax.
How the Sales Tax Deduction Works
The IRS allows you to deduct either state income taxes or general sales taxes—but not both. If you live in a state without income tax, the sales tax option becomes your default choice. Here’s what qualifies:
- Property taxes on your primary residence
- General sales taxes paid on everyday purchases
- Major purchases such as vehicles, boats, RVs, or home renovation materials
Two Methods for Claiming Sales Tax:
- Use IRS Tables: The IRS provides pre-calculated deduction amounts based on your income, family size, and zip code. For a married couple in Texas with $400,000 in income, this baseline figure is approximately $2,600-$2,700 for 2025.
Source: IRS Sales Tax Deduction Calculator – https://apps.irs.gov/app/stdc/ - Track Actual Receipts: If you make significant purchases during the year, tracking your actual sales tax payments can yield a much larger deduction. Major purchases count on top of the IRS table amount.
Taking account of both steps above allows the tax filer to cumulatively capture additional deduction for dollars already spent.
Actionable Steps for 2025:
- Combine with Other Deductions: SALT works best when paired with other itemized deductions like mortgage interest and charitable contributions. If your combined itemized deductions exceed the 2025 standard deduction ($30,000 for married filing jointly), itemizing makes financial sense.
- Track Sales Like a Pro: If you’re planning to buy a car, boat, or undertake a home renovation in the next few months, save your receipts. These sales taxes can be added to your deduction—no cap on major purchases.
- The Salt of the Earth—Property Tax Timing: If your county allows, paying your 2026 property taxes before December 31, 2025 can bunch deductions into the current year, potentially helping you exceed the standard deduction threshold and make itemizing worthwhile.
- There’s an app for that: if you didn’t save all your receipts, know that apps and software like Expensify or Wave can help you extract spending details from your accounts making it easier to calculate your actual sales tax paid versus the IRS table amount.
Important Limitations:
- The $40,000 cap phases out for high earners (incomes between $500,000-$600,000);
- The expanded SALT deduction currently sunsets in 2029; and
- If your total SALT-eligible taxes fall well below the standard deduction, itemizing may not provide additional benefit.
Key Takeaway:
Living in a no-income-tax state doesn’t mean missing out on the SALT deduction. Take these tax savings with more than a grain of salt—by strategically tracking sales taxes, especially on major purchases, and timing property tax payments.
If you’d like to discuss how this applies to your specific situation or need help optimizing your 2025 tax strategy, please reach out to your ACM Wealth advisor. We’re here to help you make the most of these opportunities before year-end.
Advisors Capital Management, LLC is an investment advisor registered with the United States Securities and Exchange Commission. Registration does not imply any degree of skill or training. All investing carries risk, including the potential for the loss of principal and past performance is no guarantee of future results. This content is for informational purposes only, can change at any time without notice, and is not investment advice or a recommendation to trade any security. Indices are not available for direct investment. We only provide services in jurisdictions where we are registered. Our disclosure brochure (ADV Part 2A) and customer relationship summary (ADV Part 3) are available at https://adviserinfo.sec.gov and upon request.
