SALT Deduction Expansion: How the OBBB Impacts High Income Earners in 2025 - EP. 187

Summary 

This episode explores the newly expanded SALT (State and Local Tax) deduction under the One Big Beautiful Bill Act (OBBB), focusing on its impact for high-income earners and residents of high-tax states. 

Key Points Covered 

SALT Deduction Expansion: 

• The cap on SALT deductions jumps from $10,000 to $40,000, a major relief for households earning under $500,000. 
• This change is especially beneficial for taxpayers in high-tax states like New York, California, Connecticut, Illinois, Massachusetts, Maryland, and the District of Columbia. 

Contrast with Social Security Tax Deduction: 

• The episode compares the substantial SALT deduction expansion to the more modest senior tax deduction discussed in previous episodes. 
• Raises questions about fairness, fiscal responsibility, and political priorities. 

Personal Perspective: 

• Travis shares insights from living in both New York (high-tax) and Tennessee (low-tax), illustrating how these policies affect different regions and income brackets. 

Tax Reform Details: 

• Travis explains how the 2017 Tax Cuts and Jobs Act raised the standard deduction and lowered tax brackets, but capped SALT deductions at $10,000, which hurt high-tax state residents. 
• The OBBB’s increase to $40,000 allows more people in high-tax states to itemize deductions, potentially saving substantial federal taxes. 

Who Benefits Most: 

• Estimated 10–15 million households could benefit, with an average household tax savings of $4,800. 
• The total cost is projected at $72 billion per year, more than double the estimated $30 billion cost of the senior tax deduction. 

Political and Fiscal Implications: 

• The episode discusses how the expanded SALT deduction disproportionately benefits higher earners in blue states, potentially incentivizing fiscal irresponsibility at the state level. 
• Highlights the political divide and debates over who should benefit from tax reform and how it affects the federal deficit. 

Critical Reflection: 

• Points out the hypocrisy in political arguments about tax breaks and deficit concerns, noting that those who criticize the senior deduction often benefit most from the SALT expansion. 
• Suggests that voters in high-tax states should push for more fiscal responsibility at the state level. 

Takeaways 

• The OBBB’s SALT deduction expansion is a significant win for high-income earners in high-tax states, but raises broader questions about fairness and fiscal policy. 
• Travis encourages listeners to consider the real beneficiaries of tax reform and the long-term impact on state and federal budgets. 

🅿️ For more DTS content check out our Patreon

Thanks to our sponsor, S.E.E.D. Planning Group! S.E.E.D. is a fee-only financial planning firm with a fiduciary obligation to put your best interest first. Schedule your free discovery meeting at www.seedpg.com

📧 For more information or to get in touch with us, visit https://www.ditchthesuits.com

About Your Host:

Travis Maus has been in financial services for over fifteen years. He is a Senior Wealth Manager and Chief Executive Officer at S.E.E.D. Planning Group. Travis also hosts the Unleashing Leadership Podcast, where he dissects some of his favorite books on leadership and how you can apply it to your business or life.