New SALT Rules: What Faculty Need to Know

If you’ve ever been told to watch your salt intake, here’s some welcome news: during tax season, more SALT (state and local tax) deductions are a good thing! Recent changes to the SALT deduction could potentially add meaningful savings to your financial plate.

Before the One Big Beautiful Bill Act in 2025, you could only deduct up to $10,000 of SALT expenses. The new law significantly increases that limit, which may benefit those with high real estate or state income taxes. Below are the key SALT tax figures to keep in mind for 2026:

• Under current law, the maximum SALT deduction in 2026 is $40,400 for all filers except those married filing separately, who are limited to $20,200.

• The phaseout window is scheduled to begin at $505,000 of modified adjusted gross income (MAGI) for all filers except those married filing separately, whose phaseout begins at $252,500. For every $1 of income above these thresholds, the maximum SALT deduction will be reduced by 30 cents.

• Taxpayers above the phaseout window may still deduct $10,000 of SALT expenses.

• The additional SALT deduction is temporary and applies through the end of 2029 unless Congress acts.

Now that we have covered the basics, let’s look at how the new SALT rules may affect your financial planning. If you have significant SALT expenses, it is important to review your income sources to understand where you fall in the phaseout range and whether you can maximize additional deductions:

• Roth conversions can shift pre-tax money into a Roth account, which may improve tax diversification and provide long-term tax-free growth, but involve immediate tax costs and may not be appropriate for all taxpayers. Under normal circumstances, you would examine your marginal tax rates to determine the conversion’s expected tax liability. However, if the Roth conversion pushes your total income into the SALT phaseout window, this can lead to a higher conversion cost, often referred to as the SALT torpedo. As your SALT declines, more income becomes taxable.

• If you are currently taking required minimum distributions (RMDs) from your IRA, qualified charitable distributions (QCDs) are one potential strategy that may lower gross income for taxpayers who are charitably inclined. QCDs are not included in your adjusted gross income and help satisfy the RMDs you need to take each year.

• There are pros and cons to consider when considering Social Security claiming strategies. If claiming benefits increases income enough to reduce your SALT deduction, that is one of several factors that may be considered when evaluating Social Security claiming strategies.

• Other ways to help reduce your adjusted gross income involve tax-loss harvesting and increasing pre-tax retirement contributions through your employer plans.

If you have significant SALT expenses and aren’t near the phase out window, it may make sense to review your charitable gifting strategies. The additional SALT deduction might help you decide whether to take the standard deduction or to itemize. If you are currently itemizing, charitable gifts and other deductions may provide more tax benefits.

Because the additional SALT deduction is only available through 2029, some taxpayers may consider front-loading future charitable contributions after evaluating cash flow needs, tax consequences, and long-term charitable intent. Funding a donor advised fund (DAF) may help some donors bunch multiple years of charitable donations into a single tax year. Contributions are generally irrevocable and may not be appropriate for all individuals.

The updated SALT deduction rules can potentially offer meaningful savings for taxpayers, but maximizing the benefit requires careful planning. Reviewing your income levels, deductions, and charitable strategy with a qualified professional may help you better understand how these changes could apply to your situation before they expire.

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.