The SALT tax changes our DC area clients are talking about

I know taxes aren’t the most exciting topic, but there are some upcoming changes that could have a real impact on your finances, especially if you own, or are considering owning, a home in the DC area. Here’s a quick breakdown of what’s changing, and what you might want to bring up with your accountant or financial advisor.

SALT stands for State and Local Taxes, which includes property taxes and state income taxes. Since 2018, the SALT deduction has been capped at $10,000.

Starting in 2025, the cap will increase to $40,000 for households with Modified Adjusted Gross Income (MAGI) under:

• $500,000 for single filers, $600,000 for married couples filing jointly

Not to get too in the weeds here, but...the deduction begins to phase out above those limits. For every $1,000 over the threshold, the $40,000 deduction is reduced by 30 percent. Once MAGI hits $600,000 for single filers or $700,000 for joint filers, the deduction is fully phased out, and you are back to the $10,000 cap.

The standard deduction is also increasing to:

• $15,750 for single filers, $31,500 for married couples filing jointly

I’m not an accountant (you probably already knew that), and every financial situation is different. But here are some rough examples based on a $1.5 million home and a household income of $300,000 to $400,000. These numbers are just meant to give you a general sense of how things stack up across the region:

Montgomery County

• Property taxes: $15,000 to $16,500
• State income tax: approximately 7.5% to 9% effective rate
• Estimated total SALT: $35,000 to $45,000

Washington, DC

• Property taxes: approximately $12,000 (after the homestead deduction)
• DC income tax: approximately 8% to 9.5% effective rate
• Estimated total SALT: $33,000 to $42,000

Northern Virginia

• Property taxes: $13,000 to $15,000
• Virginia income tax: flat 5.75%
• Estimated total SALT: $30,000 to $38,000

For many households in this range, itemizing may once again make financial sense starting in 2025, especially if you also deduct mortgage interest or charitable contributions.

If you're thinking about selling, downsizing, or simply want to understand how these changes may affect your planning, this is a great time to connect with a tax advisor or financial planner. If you need a recommendation, I’m happy to introduce you to trusted professionals.

Thank you,
Jack

P.S. A Quick Mortgage Interest Deduction Reminder:

This rule hasn’t changed, but it’s still important. Mortgage interest is only deductible on the first $750,000 of mortgage debt. If you're financing a home in the $1.5 million to $2.5 million range, a large portion of your interest is not deductible under current law.