How the ‘One Big Beautiful Bill’ reshapes SALT planning

Jump to ↓

The One Big Beautiful Bill Act (OBBB) of 2025 is reshaping state and local tax planning by raising the SALT deduction cap and adding income-based phaseouts. For tax professionals, this change brings with it both opportunity and complexity, whether it’s deciphering federal changes, navigating a mix of state conformity, or managing client expectations.  

With so much at stake, it’s essential to engage in smart, strategic planning now so you can best serve your clients. Let’s take a look at how the OBBB is reshaping SALT policy and how tax professionals like you can stay one step ahead.  

How the One Big Beautiful Bill is changing SALT policy

The OBBB introduces a temporary SALT deduction cap of $40,000 starting in 2025, which will phase out for individuals earning over $500,000. This change is part of a broader tax reform effort that also includes adjustments to other deductions, such as reducing itemized deductions for high earners.

The cap is set to increase by 1% each year through 2029, with the limit reverting to $10,000 in 2030. This legislation aims to provide significant tax relief, particularly for taxpayers in high-tax states, while also introducing income-based reductions for those exceeding certain income thresholds. 

At-a-glance: OBBB impacts to SALT

Higher cap:

• • Increases the individual SALT deduction cap from $10,000 to$40,000 for 2025
  • Raises to $40,400 in 2026
  • Adds a 1% annual increase in 2027, 2028, and 2029

Phaseouts for high earners: 

• • Starts phasing out the deduction for MAGI over $500,000 in 2025
  • Threshold rises to $505,000 in 2026, then increases 1% annually
  • Deduction is reduced by 30% of the excess income above the threshold
  • Minimum deduction allowed: $10,000

Expiration: Cap reverts to $10,000 in 2030

Effective date: Applies to tax years beginning after December 31, 2024

The OBBB also makes several provisions of the Tax Cuts and Jobs Act (TCJA) permanent. These include the standard deduction, the elimination of personal exemptions, and the preservation of certain tax credits and deductions. It also introduces new federal deductions such as the charitable deduction for cash contributions to public charities, the $2,200 per-child credit, and the deduction for up to $25,000 in qualified tip income and up to $12,500 in overtime pay. Additionally, non-itemizers can claim a charitable deduction of up to $1,000 for cash contributions to a public charity. 

For tax professionals, this is a key moment to reassess strategies, implement new tools, and maximize your clients’ tax savings. 

State conformity and decoupling trends

SALT policy shifts have a ripple effect. When the federal government enacts a tax provision, states must decide whether (or how) to incorporate it. This cascading impact affects income calculations, deductions, credits, and ultimately tax planning.  

For example, a state may conform to federal changes but later decouple through legislation, sometimes even applying the new rule retroactively which requires amended returns or recalculated estimates. Some states adopt federal tax changes automatically (i.e., rolling conformity), while others require legislative action (i.e., static conformity), and a few selectively conform on a provision-by-provision basis. This creates a patchwork of complexity for tax professionals in deciphering how federal SALT-related policy might apply differently across jurisdictions.  

Layered on top of this complexity is political volatility. The SALT cap, for example, has become a political bargaining chip in federal tax negotiations, with efforts to repeal or expand it often shifting with congressional control. Changes in leadership at the state level can also affect how aggressively states conform to or depart from federal rules. This makes SALT not only a technical tax issue but a politically fluid one. 

PTET workarounds in a new SALT era

The final OBBB legislation preserves federal deductibility of Pass-Through Entity Tax (PTET), allowing pass-through entities to continue paying state income taxes at the entity level. This change bypasses the individual SALT deduction cap and provides relief to businesses in high-tax states. Earlier versions of the bill proposed limiting or eliminating PTET deductions for Specified Service Trade or Business (SSTB) services, but these restrictions were removed in the final legislation. 

Complicating matters, however, is that PTET frameworks vary significantly by state, with new adoptions and revisions continuing into 2025 as states react to OBBB. That’s why it’s important to stay current on state-by-state developments and reassess your clients’ elections annually to ensure optimal SALT positioning. 

Strategic OBBB implications for SALT professionals

With the temporary increase in the SALT cap under the OBBB and the looming 2030 reversion, tax professionals are facing a critical window of both opportunity and complexity. The evolving landscape — marked by income-based phaseouts and shifting state-level responses — demands a forward-looking, scenario-based approach to planning. 

Scenario planning 

As states continue to revise PTET laws, introduce new workarounds, or allow existing provisions to expire, firms must be ready to model a range of possible outcomes. Scenario planning is essential to anticipate client exposure to phaseouts and identify optimal filing strategies. 

Advanced platforms like GoSystem Tax and UltraTax CS empower firms to simulate different tax positions, apply entity-level deductions where appropriate, and evaluate the impact of various filing strategies. These tools help ensure that clients are prepared for whatever direction tax policy takes. 

Client communication 

Clients need more than just compliance — they need clarity. As their SALT position may shift year to year, decisions around residency, entity structure, and elections can significantly influence deductions. Proactive, transparent communication is key. 

Solutions like CoCounsel Tax simplify this process by using AI to generate digestible summaries, client-ready insights, and real-time updates on federal and state developments. These tools make it easier to explain complex changes and help clients make informed decisions before critical deadlines. 

Advisory services 

SALT reform presents a prime opportunity to deepen your advisory relationships. Helping clients evaluate whether to elect PTET treatment, restructure pass-through income, or even reconsider state residency can position your firm as a strategic partner, not just a tax preparer. 

Each client’s situation is unique. Tailoring strategies around entity structure, timing of income, or residency status can unlock meaningful tax savings and reinforce your value as a trusted advisor. 

Technology enablement 

To stay agile in a rapidly changing environment, your team needs access to smart, responsive tools. CoCounsel Tax offers explainable AI-backed answers and real-time research capabilities, enabling faster, more confident decision-making. 

With state laws in flux, having up-to-date, jurisdiction-specific guidance is essential for accurate and responsive planning. Equipping your team with the right technology ensures your firm can adapt quickly and deliver consistent value. 

Lead SALT planning strategy, powered by technology 

The One Big Beautiful Bill is reshaping the SALT landscape in ways that demand more than just compliance. They require foresight, agility, and strategic execution. With the temporary SALT cap increase, evolving PTET frameworks, and a patchwork of state conformity, tax professionals have a unique opportunity to deliver deeper value to clients. 

By embracing scenario planning, enhancing client communication, and expanding advisory services, your firm can turn complexity into a competitive advantage. But to do so effectively, you need the right tools. 

Explore how these solutions can help you stay ahead: 

• • GoSystem Tax and UltraTax CS: Model multiple outcomes, apply entity-level deductions, and streamline tax preparation. 
  • CoCounsel Tax: Simplify complex tax law with AI-powered insights, client-ready summaries, and real-time updates. 

Want to learn more about the legislative impact of the One Big Beautiful Bill and how it may impact you? Listen to our recent podcast episode: Tax reform unpacked: What does the One Big Beautiful Bill Act mean for you?