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With tax season around the corner, some of America’s highest earners have a new deduction rule to worry about thanks to President Trump’s “big, beautiful bill.”
When the bill passed last summer, it came with a much higher limit on the federal deduction for SALT (state and local taxes) — but increasing the limit from $10,000 to $40,000 created an unfortunate loophole for households earning between $500K to $600K.
This subset of high earners will face a tax penalty experts are calling a “SALT torpedo,” according to CNBC, since the phaseout for high earners could trigger an artificially inflated tax rate (1).
As Keebler & Associates CPA Robert Keebler wrote on LinkedIn (2), “those with AGI [adjusted gross income] of over $500,000 will be subject to an unpleasant phaseout that will increase one’s effective tax rate by 30%.”
While the $30,000 increase on the SALT deduction limit seems helpful — because the 30% phaseout kicks in between $500K and $600K — you lose 30% of every dollar of benefit if your total household income falls within that bracket.
For some, this could create an effective tax rate as high as 45.5% on income above the $500K limit, Keebler explained.
The change has created major debate in Washington, as some lawmakers from higher‑tax states argue the cap is an unfair penalty on their residents. Proponents of the change argue that the rule gives states greater authority to set their tax rates (3).
Here’s how you can reduce the impact of Trump’s new SALT limit on your tax bill.
While it’s frustrating to think about a sudden, massive increase in your tax bill, there are ways to ensure your taxable income remains below the $500K threshold, which would prevent the torpedo from kicking in.
If you’re just above the threshold, you can use tax strategies to reduce your taxable income and ensure you land below $500K — like avoiding mutual funds and instead focusing on tax-efficient ETFs in your taxable brokerage accounts.
Since some mutual funds distribute year-end capital gains — but ETFs usually don’t have a yearly payout — this simple change could avoid pushing your income over the line.
Commercial real estate provides another opportunity for tax efficiencies, since some of these investments qualify for 1031 exchanges — an effective tax strategy that allows you to defer capital gains taxes when you reinvest the proceeds into a new asset.
A real estate investment platform like mogul could help you tap into this strategy. By offering fractional ownership in blue-chip rental properties, investors can receive monthly rental income and real-time appreciation alongside these tax benefits.
Founded by former Goldman Sachs real estate investors, the mogul team hand-picks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional quality offerings for a fraction of the usual cost.
Each property undergoes a strict vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8% and cash-on-cash yields averaging 10% to 12% annually. Offerings often sell out in under three hours, with investments typically ranging between $15,000 and $40,000 per property.
Since each property is held in a standalone Propco LLC, investors own the property — not the platform. Blockchain-based fractionalization adds an additional layer of safety, ensuring a permanent, verifiable record of each stake.
Getting started is quick and easy — just sign up for an account and browse available properties. Once your information is verified, you’re ready to invest like a mogul.
If you’re thinking of selling a property, now is probably not the best time to do it if your income is nearing the SALT phaseout range.
Selling a home that nets a significant profit could easily push your income into the danger zone, meaning it might make more sense to hold onto it until the situation is more favorable.
The same goes for selling any investments — it may not be worth it if your taxable income ends up somewhere in the $500K to $600K range as a result.
Understanding multi-year future tax projections can give you the insight needed to navigate the best timing for selling off investments.
Range provides all-in-one wealth management services that include tax projections, helping ensure you know exactly what the future tax implications will be for every investment decision you make. This way, you can time your sell-offs in the most tax-effective way.
Range’s clients receive 24/7 expert advice and personalized strategies, providing complete portfolio customization and full wealth management, including complex tax management.
Book your free demo with the Range team today to find out how they can help you take advantage of the tax breaks you’ll need under Trump’s new bill.
If you want to ensure you are avoiding the SALT torpedo at all costs, a financial advisor can help set up your finances in a way that could protect your income from this extra tax by ensuring you are investing in sheltered assets, maximizing your IRA and making charitable contributions.
If you’re not sure where to find a qualified advisor, consider Advisor.com. Just answer a few quick questions and you’ll be matched with the best potential advisors for your needs.
