SALT Deductions Tax Planning for Real Estate Portfolios

December 18, 2025

By: Jason Rosenberg

Partner, Tax

The Tax Cuts and Jobs Act capped SALT deductions at $10,000 for individuals. Real estate investors lost access to six-figure deductions overnight. Since 2018, that cap defined tax planning for property portfolios.

Then the One Big Beautiful Bill Act (2025 Tax Act) changed the game again. The SALT cap increased to $40,000 through 2029—but with income phaseouts that introduce new planning considerations.

If you’re holding real estate across multiple states, your strategy just got an overhaul.

The New $40,000 Reality

The 2025 Tax Act temporarily raised the SALT deduction cap from $10,000 to $40,000 for most filers. Property taxes, state income taxes—all of it now fits under a higher ceiling.

The catch? The deduction phases out for modified adjusted gross income over $500,000. And it reverts to $10,000 in 2030.

For real estate investors in high-tax states, this creates a five-year planning window. However, a diversified portfolio of properties generating substantial property taxes still face significant limitations. The $40,000 cap helps—but it’s far from a complete solution.

The government’s message is still: figure it out.

When Entity Structure Still Matters

Here’s what didn’t change: SALT deductions tax planning remains an entity structuring exercise.

The $40,000 cap applies to individuals. It doesn’t apply to businesses operating through pass-through entities.

Hold properties in your personal name? You’re capped at $40,000. Hold properties through S-corps, partnerships, or LLCs taxed as flow-through entities? Those entities deduct state taxes at the entity level before passing income through to you.

The math just shifted. Portfolios with $35,000 in SALT don’t need restructuring anymore. Portfolios with $85,000 still do.

Pass-Through Entity Elections

Several states created workarounds when the original $10,000 cap hit. Pass-through entity tax (PTET) elections let your LLC or S-corp pay state taxes at the entity level. You then claim a corresponding credit on your personal return.

The result? Your entity deducts the full state tax payment. Your personal SALT limitation becomes irrelevant. You’ve converted a capped personal deduction into an unlimited business deduction.

Fast-forward to today, and nearly all states with a personal income tax offer PTET elections. Is this legal? Absolutely. The IRS allowed it in Notice 2020-75.

While the new $40,000 SALT cap changes the benefit calculation, the PTET strategy remains a powerful planning technique for portfolios exceeding that threshold.

Residency Matters More Than Ever

When analyzing PTET elections, the owner’s state of residency is a critical factor. When an owner elects to pay tax at the entity level in a nonresident state, the home state’s treatment of resident credits becomes critical. Most states allow a credit for taxes paid to other jurisdictions, but the mechanics can vary, and not all states grant a credit for PTET taxes. For example, if a Pennsylvania resident invests in a New Jersey partnership and the entity makes a PTET election in New Jersey, the question becomes: Will Pennsylvania allow a resident credit for those entity-level taxes? If the answer is yes, the election can significantly reduce the owner’s overall tax burden. If not, the benefit may be limited or even create double taxation.

Careful review of residency rules and credit eligibility ensures that PTET elections deliver the intended relief rather than unexpected surprises. This is essential for multistate investors navigating the SALT cap and planning across jurisdictions.

Timing Elections Strategically

Pass-Through Entity (PTE) elections aren’t automatic, they must be made by specific deadlines, and in some states, the election must occur before the tax year begins. Missing these windows can mean forfeiting significant tax benefits.

With the scheduled 2030 sunset of the current rules, timing becomes even more critical. Investors need to plan for both the temporary $40,000 SALT cap and its eventual reversion to $10,000—building flexibility into their multi-year strategy.

Smart SALT Planning for Your Real Estate Portfolio

The SALT deduction, whether at $10,000 or the temporary $40,000 limit—remains a defining factor in tax planning for high-income individuals and real estate investors. While recent changes offer partial relief, they don’t eliminate the complexity of multistate tax planning. PTET elections continue to be an essential tool for maximizing deductions, particularly when combined with careful residency analysis and timing strategies.

As the 2030 sunset approaches, proactive planning is critical to ensure flexibility and minimize exposure.

SALT deductions tax planning for real estate portfolios requires state-specific expertise and careful entity structuring. Wiss & Company works extensively with real estate investors, navigating multi-state tax obligations and optimizing portfolio structures for maximum tax efficiency under the 2025 Tax Act.