The New Changes in SALT Deductions Can Benefit New Yorkers

2026 will be an important year for tax law, as the result of new and significant changes. One of them, informally known as the One Big Beautiful Bill Act (OBBB), is going to raise some maximums of deductions, but only temporarily. What does this mean and how is it going to affect New Yorkers?

SALT deductions and the OBBB changes

The State and Local Tax (SALT) deduction lets people who list specific expenses subtract certain state and local taxes they have already paid from their federally taxable income.

Under the prior law, these deductions were capped at $10,000, The OBBB Act made the following changes:

• Cap increase: There is an increase to $40,000 for single filers and married couples filing jointly. This increase began in the 2025 tax year (filed in 2026) and is scheduled to last through 2029.
• Phase-down: The full $40,000 benefit is subject to a phase-down for high earners. The cap begins to reduce once Modified Adjusted Gross Income (MAGI) exceeds $500,000 and is completely reduced to the $10,000 minimum for those with MAGI of $600,000 or higher.

These are two of the most important changes for taxpayers.

How it benefits New Yorkers

New York is among the states with the highest tax burdens. This means the increased $40,000 SALT deduction will provide substantial relief to upper-middle-income earners by reducing federal tax liability.

Crucially, the OBBB Act did not restrict the existing Pass-Through Entity Tax (PTET) workaround, meaning that New York’s elective PTET allows partnerships and S-corporations to pay the state tax at the entity level. Because business taxes are federally deductible, this mechanism lets business owners bypass the individual $10,000 SALT cap, which is highly beneficial for high earners who were over the old limit.

Opportunities and investments

This extra cash flow can significantly impact financial strategies:

• Real estate: Taxpayers may opt to reinvest their savings by buying new rental properties, renovating a primary home, or exploring commercial ventures. This is a critical time to identify promising markets to maximize returns before the $40,000 cap reverts in 2030.
• Estate planning: An increase in disposable wealth also affects estate and gift planning strategies, potentially enabling greater use of annual gift exclusions or funding irrevocable trusts.

  If they opt for the former, they might consider state benefit programs like STAR.

Acting ahead of time

While the SALT deduction changes are new to everyone, navigating them and their relationship with real estate and estate planning requires professional guidance, like the one an experienced law firm can provide. Consulting can help you create a more nuanced strategy that meets your investment goals.