SALT Deduction Cap Workarounds: What I Learned After Losing Thousands

Did you know that millions of homeowners lost an average of $1,000+ in federal tax benefits after the 2017 Tax Cuts and Jobs Act slapped a $10,000 cap on the State and Local Tax (SALT) deduction? Yeah. That stings. I found out the hard way when my tax bill jumped and I just sat there staring at the numbers like they were written in another language.

If you live in a high-tax state like California, New York, or New Jersey, you already know this cap hits differently. So I went on a mission to figure out every legal workaround I could find — and honestly, some of them surprised me.

What Is the SALT Deduction Cap, Anyway?

Real quick, let’s get on the same page. The SALT deduction lets you deduct state income taxes, local taxes, and property taxes from your federal taxable income. Before 2018, there was no cap. Then boom — $10,000 limit, and a lot of taxpayers got hit hard.

For married couples filing jointly, it’s especially brutal because the cap is the same $10,000 — not double. That one detail alone cost my neighbor a ton of money before she even realized what happened.

The Pass-Through Entity (PTE) Tax Election

Okay, this is the big one. If you own a business that’s structured as an S-corp, LLC, or partnership, your state might let you use a Pass-Through Entity tax election. Basically, the business pays the state taxes instead of you personally — and that payment is fully deductible at the federal level.

Over 30 states have now passed PTE workaround legislation. It’s not shady at all; the IRS actually blessed this approach back in 2020 with Notice 2020-75. I helped a friend set this up for his consulting LLC and he saved a solid chunk of change last tax season.

Charitable Contribution Workarounds

Some states created programs where you can donate to a state-run charitable fund and get a state tax credit in return. The idea was that a charitable deduction isn’t subject to the SALT cap. Smart, right? Well, the IRS pushed back on some of these, so you gotta be careful here.

The workaround still works in certain states, but the credit you get can’t be too close to 100% of your donation — otherwise the IRS treats it like a tax payment, not a charitable gift. Definitely run this one by a qualified tax professional before jumping in.

Timing Your Deductions Strategically

This one’s more of a planning trick than a workaround, but it works. If you prepay your property taxes before December 31st, you can bunch deductions into one tax year. Then you alternate — take the standard deduction one year, itemize the next.

I actually tried this and it made a real difference. It’s called deduction bunching, and it’s one of those things that sounds complicated but really isn’t once you map it out on paper. Just don’t forget — you can only prepay property taxes that have already been assessed.

Relocating to a Lower-Tax State

Okay I know, I know — this sounds extreme. But hear me out. More and more people are seriously considering moving to states with no income tax, like Florida or Texas, especially now that remote work is so common. The SALT cap actually made this decision easier for a lot of folks.

This isn’t a quick fix, and it comes with real lifestyle trade-offs. But if you’re already thinking about relocating, comparing state tax burdens is absolutely worth your time. Just make sure the move is genuine — the IRS and your old state will look at domicile rules closely.

Is the Cap Going Away Soon?

There’s been a lot of noise in Congress about lifting or eliminating the SALT cap. Some proposals have floated raising it to $80,000 for joint filers, while others want it gone entirely. As of 2026, the original TCJA provisions are set to expire, which could change things significantly. Keep an eye on updates from the U.S. Congress website — things could shift fast.

Your Next Move Matters More Than You Think

Look, navigating the SALT deduction cap isn’t something you should do alone or leave to chance. The workarounds are real and they’re legal — but every situation is different, and what works for your neighbor might not work for you. Always loop in a tax professional before making big moves, and make sure whatever strategy you use is properly documented.

The most important thing? Don’t just accept the hit and move on. There are options on the table, and you deserve to know what they are. If this article got your wheels turning, come hang out over at Deduction Desk — we’ve got more posts breaking down tax strategies in plain English, just like this one. You might be surprised how much money is still on the table.