SALT Deduction and Tax Changes Help Homeowners

What is the SALT Deduction and Why Does It Matter?

Let’s break it down simply. The SALT deduction stands for State and Local Tax deduction. This means when you file your federal taxes, you can subtract (or “deduct”) what you’ve already paid in state and local taxes, including property taxes and income taxes, from your total income. That helps lower the amount of taxes you owe to the federal government.

In the past, people could only deduct up to $10,000 of these taxes. But now, starting in 2025, the new tax law raises that cap to $40,000 for five years. That’s a big win for homeowners—especially in states like Colorado, where property taxes can be high.

How the SALT Deduction Helps Homeowners in 2025

This SALT deduction change is part of a bigger tax reform bill passed by Congress. The goal? To make homeownership more affordable. With this new law:

• More homeowners can save money on their federal taxes.

• People who live in places with high local taxes will benefit the most.

• Families can put more of their hard-earned money back into things like savings, home repairs, or college funds.

And that’s not all. The new law also:

• Keeps mortgage interest deductions in place (so you can still deduct the interest you pay on your home loan)

• Helps small business owners and independent workers with better tax breaks

• Supports affordable housing with tax credits

• Increases the Child Tax Credit to $2,200 per child

What Do These Tax Terms Mean?

Let’s explain a few terms so everything makes sense:

• Deduction: An amount of money you subtract from your total income before figuring out how much tax you owe. Deductions help you pay less in taxes.

• Mortgage interest deduction: A tax break that lets you deduct the interest you pay on your home loan.

• 1031 exchange: A rule that helps people who invest in property avoid paying taxes right away when they sell one property and buy another.

• Child Tax Credit: A benefit that gives parents money back on their taxes for each child they have.

• Affordable housing tax credits: Incentives that help builders and developers create homes that cost less to buy or rent.

Why This Matters for You

This new law gives homeowners more ways to save money. By raising the SALT deduction cap and protecting other tax breaks, it encourages people to buy and keep homes—and helps families keep more of their income.

If you’re thinking about buying or selling a home, or just want to understand how this helps your family, I’m here to talk! Let’s make sense of it all together.

Would you like a printable cheat sheet or help figuring out what this means for your taxes? Send me a message!