Trump’s ‘big beautiful bill’ adds SALT deduction ‘torpedo,’ pro says
US representative Josh Gottheimer, D-NJ, Washington, DC on February 08, 2023 on Wednesday, a press conference outside Capitol.
Matt McClain | Washington Post | Getty Images
President Donald Trump’s ‘Big Beautiful Bill’ offers a temporary border for the federal deduction for the state and local taxes known as SALT. However, experts say you can trigger a tax surprise for some high earnings.
If you specify tax cuts in detail, you can request salt outage of state and local income taxes and real estate taxes. Trump’s legislation It increases the salt cut limit in 2025 and increases by an annual increase of 1% to 2029 to $ 40,000 before returning to $ 10,000 in 2030.
However, a $ 40,000 salt hat starts to gradually remove when it exceeds $ 500,000, the modified gross income or MAGI starts. When the MAGI reaches $ 600,000, the salt limit decreases to $ 10,000. Maggi Corrected gross income Some tax cuts are added back.
When this phase decreases between $ 500,000 to 600,000 dollars, the certified public consultant Jeff Levine “can create an artificial high tax rate – a” salt torpedo “. He said in a LinkedIn post This week.
In some cases, you can pay 45.5% federal tax rate for the gains between these thresholds.
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According to tax experts, how the “salt torpedo” works and who can be affected is explained below.
How does the salt cutting work work
In accordance with Trump’s legislation, the salt cut limit for 2025 is now $ 30,000 higher. However, Magi started a 30% Fazout after exceeding $ 500,000 for 2025.
Massachusetts, Baker Newman Noyes General Manager certified financial planner Jim Guarino, $ 500,000 to 600,000 dollars “You lose 30% for each dollar,” he said. At the same time an ebm.
If you increase the extra $ 100,000 income by 30%at $ 600,000, this is a benefit of $ 30,000, which reduces the $ 40,000 salt cover to $ 10,000.
A ‘strange’ Fazout increases the tax rate
According to the tax consultancy firm Keebler & Associates in Wisconsin, Robert Keebler, which is an EBM, they can pay higher taxes between $ 500,000 to $ 600,000 to $ 500,000 and $ 600,000, a higher tax between these thresholds.
Between 500,000 and 600,000 dollars, you increase the taxable income while losing a part of the salt cuts, which Effective tax rate – the taxable income percentage you pay.
Keebler said that if the taxation income increases while the salt deduction increases, your effective tax rate on income between $ 500,000 to 600,000 dollars may exceed your normal income tax rate. In a LinkedIn post last week.
Baker Tilly’s Washington Tax Council application Andy Whitehair, CNBC’ye told, “A absolutely interesting small phase -convenience service,” he said. “When people really start crushing numbers, they can be for some surprises.”
Whitehair shared a basic example This week, the phase in LinkedIn.
If your income is $ 500,000 and if you make a deduction of $ 75,000 ($ 40,000 for salt), your taxable income is $ 425,000.
In contrast, it will reduce the salt reduction of $ 600,000 to $ 10,000, which will reduce detailed deductions to $ 45,000 and increase taxable income to $ 555,000.
In this simplified example, Whitehair earns more than $ 100,000, which was 45.5%, said there was more than $ 45,500 more federal taxes.
If your 2025 earnings may be close to $ 500,000, you must projection with a tax consultant and weigh strategies to reduce Magi.
According to Keebler, you can lead to $ 500,000 to 600,000 dollars with a perpendicular tax penalty and 500,000 to 600,000 dollars, Roth you can lead to other moves that can increase your retirement transformations, large capital gains or income.
