Trump's 'big Beautiful Bill' Could Deliver 45.5% 'salt Torpedo' For High Earners, Tax Pro Says

President Donald Trump’s ‘big beautiful bill’ delivers a impermanent higher limit connected nan national conclusion for authorities and section taxes, known arsenic SALT. But nan phaseout, aliases income-based use reduction, could trigger a tax surprise for immoderate higher earners, experts say.

If you itemize taxation breaks, you tin declare nan SALT deduction, which includes authorities and section income taxes and spot taxes. Trump’s legislation raises nan SALT conclusion limit to $40,000 starting successful 2025, pinch a 1% yearly summation done 2029, earlier reverting to $10,000 successful 2030.

However, nan $40,000 SALT headdress starts to shape retired erstwhile modified adjusted gross income, aliases MAGI, exceeds $500,000. The SALT limit drops to $10,000 erstwhile MAGI reaches $600,000. MAGI is adjusted gross income pinch immoderate taxation breaks added backmost in.

This phaseout tin create a “SALT torpedo” — an artificially precocious taxation complaint — erstwhile MAGI falls betwixt $500,000 and $600,000, certified nationalist accountant Jeff Levine said successful a LinkedIn post this week.

In immoderate cases, you could salary a 45.5% national taxation complaint connected net betwixt those thresholds, experts say.

Here’s really nan “SALT torpedo” useful and who could beryllium impacted, according to taxation experts.

How nan SALT conclusion phaseout works

Under Trump’s legislation, nan SALT conclusion limit for 2025 is now $30,000 higher. But a 30% phaseout kicks successful erstwhile MAGI exceeds $500,000 for 2025.

Between $500,000 and $600,000, “you’re losing 30% for each dollar” of use betwixt those thresholds, said certified financial planner Jim Guarino, managing head astatine Baker Newman Noyes successful Woburn, Massachusetts. He is besides a CPA.

At $600,000, if you multiply nan other $100,000 of income by 30%, that’s a $30,000 use reduction, which drops nan $40,000 SALT headdress backmost to $10,000.

A 'quirky' phaseout boosts taxation rate

With nan 30% SALT conclusion phaseout betwixt $500,000 and $600,000 of MAGI, immoderate individuals could salary a higher-than-expected taxation connected net betwixt those thresholds, according to Robert Keebler, a CPA pinch taxation advisory patient Keebler & Associates successful Green Bay, Wisconsin.

Between $500,000 and $600,000, you’re expanding taxable income while losing portion of nan SALT deduction, which raises your effective taxation rate — nan percent of taxable income you pay.

If taxable income rises while nan SALT conclusion falls, your effective taxation complaint connected income betwixt $500,000 and $600,000 could acold transcend your regular income taxation rate, Keebler said in a LinkedIn post past week.

“It’s decidedly a quirky small phaseout provision,” Andy Whitehair, a CPA and a head pinch Baker Tilly’s Washington taxation assembly practice, told CNBC. “When group commencement really crunching numbers, they mightiness beryllium successful for immoderate surprises.”

Whitehair besides shared a basal example of nan phaseout connected LinkedIn this week.

If your income is $500,000 and you subtract $75,000 of itemized deductions (including $40,000 for SALT), your taxable income is $425,000.

By contrast, $600,000 of income would driblet nan SALT conclusion to $10,000, which reduces itemized deductions to $45,000, and raises taxable income to $555,000.

When comparing taxable income for each example, nan existent quality is $130,000 pinch nan $30,000 mislaid SALT deduction. If you multiply that by nan 35% taxation bracket, you get $45,500.

In this simplified example, location is $45,500 much national taxation owed by earning $100,000 more, which is 45.5%, Whitehair said.

If your 2025 net could beryllium adjacent $500,000, you should tally projections pinch a taxation advisor and measurement strategies to trim MAGI, experts say.

With nan steep taxation punishment betwixt $500,000 and $600,000, you whitethorn reconsider Roth individual status conversions, incurring ample superior gains aliases different moves that could boost your income, according to Keebler.