The SALT deduction cap quadrupled from $10,000 to $40,000 starting in 2025, giving New York business owners a federal tax break they have not had since 2017. But the benefit is not universal. Income thresholds, filing status, and a phaseout determine how much each owner actually receives. Heritage Accountants & Advisors helps closely held businesses across Long Island work through these calculations.
The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, raised the individual SALT deduction cap from $10,000 to $40,000 for tax years 2025 through 2029. The higher cap applies retroactively from January 1, 2025.
The cap and income threshold each increase 1% annually through 2029. Both revert to $10,000 in 2030.
New York business owners with MAGI under $500,000 who itemize deductions stand to gain the most.
New York has some of the highest combined state and local tax rates in the country. A Long Island owner paying $35,000 in state and local taxes was previously limited to deducting only $10,000 federally. Under the new cap, that same owner deducts the full $35,000.
Owners must itemize on IRS Schedule A to access the deduction. For some New York business owners, the higher SALT cap may make itemizing more beneficial than taking the standard deduction, depending on their overall tax profile and available deductions.
Owners with MAGI above $500,000 face a phaseout that reduces the $40,000 cap by 30 cents for every dollar above the threshold, down to a floor of $10,000.
Tax professionals call this the "SALT torpedo." Owners with MAGI between $500,000 and roughly $600,000 see each additional dollar of income reduce their deduction, spiking their effective federal rate. Above $600,000, the deduction floors at $10,000.
The OBBBA preserves the PTET deduction entirely. Business owners can still use PTET alongside the higher individual SALT cap.
The OBBBA also removed restrictions that had limited service-based businesses (SSTBs) from the PTET workaround. All pass-through entities in New York now have full access to both tools. Whether to use the individual SALT deduction, PTET, or both depends on each owner's income and entity structure. This is where financial consulting for businesses in NY provides direct value.
Our team provides small business consulting services to help owners adjust to the new cap. Three practical steps:
Check whether itemizing beats the standard deduction, given your state and local tax payments
Model the phaseout if your MAGI is near $500,000 to avoid the torpedo effect
Start planning your 2027 PTET election now. Please note that the New York PTET election deadline is strictly March 15, with no exceptions and no late-filing relief.
Business consulting services on Long Island from a firm with Big 4 backgrounds and AICPA membership means planning that reflects current law. Financial service consulting firms that stay current with legislation like the OBBBA protect owners from decisions based on outdated rules.
Is the $40,000 SALT cap permanent?
No. It applies to tax years 2025 through 2029 and reverts to $10,000 in 2030.
Do I need to itemize to claim it?
Yes. The deduction requires IRS Schedule A. Owners taking the standard deduction cannot access it.
Does the new cap eliminate the need for PTET planning?
Not for everyone. Owners above the $500,000 threshold still face a reduced SALT deduction and may benefit more from the PTET structure.
Contact Heritage Accountants & Advisors at (631) 543-7700 or info@heritage.cpa to review how the SALT cap affects your tax position. Mid-year is the right time to adjust your strategy.
Disclaimer: This information is for general educational purposes only and does not constitute professional tax, legal, or investment advice. Tax laws are subject to change and individual circumstances vary. Please consult with a qualified CPA or tax advisor regarding your specific tax situation.
