MML #037: Breaking Down the New Enhanced SALT Deduction: Finally Some Relief For Lawyers

If you're retiring in a high-tax state like New York, California, or New Jersey, I have both good news and bad news about the One Big Beautiful Bill.

Let’s start with the good news. The state and local tax deduction cap just jumped from $10,000 to $40,000 through 2029—potentially saving you thousands in federal taxes.

The bad news? 

Well, at least for now it's temporary. Come 2030, we're back to the $10,000 limit unless Congress acts again.

That gives you exactly four tax years to maximize this benefit. The clock is ticking.

Why This Matters More for Lawyers

Legal careers often cluster in expensive metropolitan areas. New York City, San Francisco, Los Angeles, Boston—cities where successful law practices thrive but property taxes and state income taxes can be brutal.

If you built your career in one of these markets and stayed for retirement, you're probably paying substantial state and local taxes. Before the One Big Beautiful Bill, you could only deduct $10,000 of those taxes on your federal return, no matter how much you actually paid.

Now you can deduct up to $40,000—but only if your modified adjusted gross income stays under $500,000. Above that threshold, the deduction phases out and eventually disappears.

The Real Dollar Impact

Let's get specific about what this means. Say you're a retired lawyer in Westchester County, New York, with a home worth $800,000. Your property taxes alone might run $20,000 annually. Add state income taxes on your retirement distributions, and you could easily hit $30,000 to $35,000 in total state and local taxes.

Under the old rules, you'd deduct $10,000 and eat the rest. Now you can deduct the full amount, potentially saving $6,000 to $8,000 in federal taxes annually if you're in higher tax brackets.

Multiply that by four years, and we're talking about $24,000 to $32,000 in tax savings during this temporary window.

Geographic Winners and Losers

This change creates clear winners and losers based on where you live. Retirees in Florida, Texas, Tennessee, and other no-income-tax states won't see much benefit—their SALT taxes were probably under $10,000 anyway.

But if you're in high-tax states, the impact can be substantial. Let’s just pick on a few:

New York – High state income and property taxes, often exceeding $40,000 for professionals.

California – State income taxes alone can push retirees well past the $10,000 SALT cap.

New Jersey – Combination of steep property and income taxes creates heavy SALT burdens.

The $500,000 Income Cliff

Here's where strategic planning becomes crucial. The enhanced SALT deduction phases out starting at $500,000 and completely phases out at $600,000 in modified adjusted gross income (in this case the deduction reverts back to the original $10,000 cap).

If your retirement income hovers around these thresholds, you have decisions to make. Maybe you time large retirement account withdrawals to stay under the limit in high SALT tax years. Or you consider relocating to a lower-tax state before the 2029 cliff arrives.

It makes sense to do some math here to understand where exactly you may be able to take advantage.

Planning Around the Cliff

The 2017 Tax Cuts and Jobs Act pushed many taxpayers away from itemizing. With the standard deduction rising and the SALT deduction capped at $10,000, itemizing simply didn’t make sense for a lot of filers.

If you skipped itemizing in the past because of the old $10,000 SALT cap, the new $40,000 limit may change the math. Suddenly, deductions that didn’t move the needle before — like charitable giving — could actually count again.

It might also be the right time to move forward with property-related decisions you were already considering, such as renovations that raise your property taxes. With at least a four-year window of higher SALT relief, the timing may work in your favor.

Or, if relocating to a lower-tax state has always been on your “someday” list (Hello Florida!), this could be the perfect planning window to make that transition on your own terms.

Bottom Line

Some might hope Congress extends this provision past 2029. Maybe they will, maybe they won't. Tax policy is unpredictable, and hoping for extensions isn't a strategy.

What we know for certain is that you have four years of enhanced deduction capacity. Use it.

The enhanced SALT deduction creates real tax savings for high-earning retirees in expensive states, but only through 2029. That's four tax filing seasons to maximize the benefit before we revert to the old $10,000 limit.

If you're paying substantial state and local taxes in retirement, this temporary provision deserves serious attention in your tax planning. Current-year tax savings are helpful, but the biggest advantage comes from keeping more dollars invested where they can compound and grow for decades.