By Eric Berman, REALTOR® | The Eric Berman Team at Compass
TL;DR:
The SALT cap got a big — but temporary — overhaul in 2025. The federal deduction limit for state and local taxes jumped from $10,000 to $40,000 (and rises slightly each year through 2029), with a phase-down beginning at $500,000 of household income. For Long Island homeowners who've been living with the old $10K cap since 2018, this is a meaningful shift in after-tax math. It's also scheduled to expire at the end of 2029, which makes the 2026–2029 window worth paying attention to for sellers thinking about timing.
What Actually Changed With the SALT Cap
For seven years — from the 2017 Tax Cuts and Jobs Act through the 2024 tax year — the federal deduction for state and local taxes was capped at $10,000 per household. For Long Island homeowners paying $15,000, $25,000, or even $35,000+ in combined property and state income taxes, that cap was painful. It effectively raised the after-tax cost of owning a home in Nassau County or Northeast Queens, and there's a credible argument that it suppressed home values across the high-tax suburbs of New York, New Jersey, and Connecticut for years.
The One Big Beautiful Bill Act, signed into law in July 2025, changed the math. The SALT cap quadrupled to $40,000 for tax year 2025. For 2026, it rises to $40,400. From 2027 through 2029, it continues to rise by approximately 1% each year. In 2030, the cap reverts back to $10,000 unless Congress passes another extension. That five-year window — 2025 through 2029 — is when most Long Island homeowners will see real federal tax relief from the new structure.
The catch: the higher cap phases down for higher-income households. The full $40,000 deduction is available to filers with modified adjusted gross income (MAGI) below $500,000. Above that threshold, the deduction is reduced by 30 cents for every dollar of income over the line, until it floors out at $10,000 for households with MAGI above approximately $605,000. For 2026, the phase-down starts at $505,000 of MAGI and floors out at roughly $606,000. The thresholds rise modestly each year.
What This Means for Long Island Sellers
The SALT cap change affects Long Island sellers in three distinct ways, and it's worth separating them.
The first is the buyer pool. When a buyer is shopping for a $1.5M home in Manhasset, Garden City, or Roslyn, their after-tax monthly cost matters as much as the purchase price. Under the old $10K cap, a buyer with $25,000 in property taxes and $20,000 in state income taxes was effectively losing $35,000 of deductible expense at the federal level. Under the new $40K cap, most of that comes back — assuming they're under the income phase-down threshold. That changes what buyers can afford to bid, and it's part of why the broader Long Island market has felt slightly less pressure on the demand side over the past year.
The second is household timing. For Long Island homeowners who've been thinking about selling but holding off, the 2025–2029 window is now a tax-favorable period for owning. The federal benefit of holding onto a high-property-tax home is meaningfully higher right now than it was from 2018–2024. For some homeowners, that pushes the math toward staying a few more years. For others — particularly those with kids out of school and a home that's outgrown its purpose — the window is a useful planning anchor but doesn't change the underlying decision to sell.
The third is what happens after 2029. If the higher cap expires as scheduled, Long Island homeowners with high property tax bills will face the same $10K federal cap they lived with from 2018–2024. Some forecasters expect Congress to extend the higher cap before it sunsets; others don't. Sellers planning a 5–7 year hold should think about how the 2030 reversion might affect resale demand at that point, particularly for higher-tax-bracket buyers.
The Income Phase-Down Hits Many North Shore Households
The $500,000 MAGI phase-down threshold is high enough that most Long Island households are below it. But for the upper-mid and luxury markets — Manhasset, Port Washington, Garden City, Plandome, Old Westbury, Roslyn — a meaningful share of buyers and sellers are at or above that threshold. For those households, the new SALT cap doesn't help nearly as much as the headline number suggests.
A married couple with $600,000 in MAGI, for example, sees their SALT cap reduced from the headline $40,400 (in 2026) to roughly $11,720 — only marginally better than the old $10,000 cap. A couple at $700,000 of MAGI is back to the $10,000 floor. For these households, the SALT change is nearly invisible.
This matters for sellers in two ways. First, it explains why the SALT relief has been less than transformative for the very high end of the Long Island market. Demand at the $3M+ level is driven by buyers whose income often pushes them above the phase-down. Second, it creates a quiet planning conversation for sellers thinking about when to recognize a large gain. The interaction between sale year, MAGI for that year, and SALT deductibility is the kind of detail that's worth working through with a CPA before signing a listing agreement.
How This Interacts With Property Tax Reassessment
The SALT change comes at the same time as Nassau County's ongoing property tax reassessment cycle. The combination matters: a Long Island seller who has been frustrated by rising assessments can now deduct a much larger share of those property taxes federally — at least through 2029, and at least for households below the income phase-down.
For sellers who've been considering a tax grievance, the math has shifted. A successful grievance still saves money, but the after-tax savings are smaller than they were under the old $10K cap, because more of the property tax was already deductible federally under the new structure. None of this changes whether a grievance is worth filing — that depends on the assessment versus market value of the specific home — but it does affect how sellers should think about the financial benefit.
For broader context on the property tax landscape that affects Long Island sellers, the Nassau County reassessment overview walks through what the reassessment is, when changes hit assessment rolls, and how it affects sale planning.
What Sellers Should Actually Do With This Information
The SALT cap change isn't the kind of news that should drive a rushed listing decision either way. It's a backdrop variable — one input among many in the seller's overall situation. But there are a few practical takeaways.
For Long Island sellers planning to list in the 2026–2029 window, the new cap is a quiet positive for buyer affordability in the under-$500K-MAGI buyer pool. That's most of the market under $2M. The buyer pool for these homes has slightly more room to bid than they did two years ago, which translates into stronger demand for well-priced, well-marketed listings.
For sellers in the $1M–$3M band considering whether to list now or wait, the federal tax math currently favors continued ownership for most households below the income phase-down. But "wait" is rarely the right answer for the wrong reasons — life stage, family timing, and the home's actual fit for current needs are usually bigger drivers of the sell-or-stay decision than a marginal federal tax change.
For ultra-high-income sellers above the phase-down threshold, the SALT change is functionally minor. Decisions for these households should center on capital gains planning, the NY Mansion Tax at the $1M threshold, and the timing of large taxable events — none of which are affected materially by the new SALT structure.
For sellers thinking about a sale in 2030 or beyond, the scheduled reversion to a $10K cap is worth flagging early in planning conversations. Whether Congress extends the higher cap is genuinely uncertain.
A Footnote on the PTET Workaround
For Long Island sellers who own businesses structured as S-corps or partnerships, New York's Pass-Through Entity Tax (PTET) workaround is still available under the new law. PTET allows business owners to pay state taxes at the entity level — effectively bypassing the SALT cap on those tax payments. This is a CPA conversation, not a real estate one, but it's worth raising because some sellers have a meaningful share of their state tax burden coming through pass-through entities, and the math on whether to lean into PTET versus rely on the higher individual SALT cap depends on individual circumstances.
For sellers with this profile, the right move is to make sure the listing timeline and the tax planning timeline are talking to each other. A sale that closes in late December versus early January can shift income recognition into a different year, which can affect both SALT phase-down and PTET decisions.
The Long Island Bottom Line
The SALT cap quadrupling is the most significant change to the federal tax treatment of homeownership in high-tax states in nearly a decade. For most Long Island sellers in 2026, it's a quiet positive — better buyer affordability in the broad market, better personal deductibility while still holding the home. For sellers above the income phase-down, the change is largely invisible. For everyone, the 2030 sunset is worth keeping on the planning radar.
None of this changes the fundamentals of a successful Long Island home sale: the right pricing, the right marketing, the right attorney, and the right timing for the seller's life. But the federal tax backdrop is friendlier in 2026 than it has been in years, and that's a useful piece of context for any seller weighing the decision to list.
Q: What is the SALT cap and what changed in 2025?
A: The SALT cap is the federal limit on how much of state and local taxes — property taxes, state income taxes, and certain other state taxes — a household can deduct on federal income tax returns. From 2018 through 2024, the cap was $10,000 per household. The One Big Beautiful Bill Act, signed in July 2025, raised the cap to $40,000 for tax year 2025, $40,400 for 2026, and rising approximately 1% per year through 2029. The cap is scheduled to revert to $10,000 in 2030 unless Congress acts.
Q: Does every Long Island homeowner benefit from the higher SALT cap?
A: No. The full $40,000+ cap is available only to households with modified adjusted gross income below approximately $500,000. Above that threshold, the deduction phases down by 30 cents for every dollar of income over the line. At roughly $605,000–$606,000 of MAGI, the cap floors out at $10,000 — the same as the old cap. For most Long Island households this isn't an issue, but for upper-mid and luxury markets, the phase-down significantly reduces the benefit.
Q: How does the new SALT cap affect Long Island home values?
A: The cap change generally improves after-tax affordability for buyers below the $500,000 income threshold, which covers most of the Long Island buyer pool under $2M. Better affordability translates into slightly stronger demand for well-priced listings. For the very high end of the market — homes above $3M, where buyers often have income above the phase-down — the SALT change has less direct effect on demand.
Q: Should a Long Island seller wait until after the 2030 SALT cap reversion to sell?
A: Almost never. The decision to sell is driven by life stage, family needs, the fit of the home, and overall financial planning — not by a single federal tax variable. The SALT cap is a backdrop, not a trigger. That said, sellers planning sales in 2030 or later should account for the possible reversion to the $10K cap when projecting buyer affordability and demand at that point.
Q: Is the SALT cap deduction still worth using if a seller takes the standard deduction?
A: No — the SALT deduction is only useful for households that itemize deductions. For 2026, the standard deduction for a married couple filing jointly is well over $30,000. Households with relatively low SALT and limited other itemizable deductions may still come out ahead taking the standard deduction. A CPA can run both calculations to confirm which produces the better outcome.
For sellers thinking through a Long Island home sale in 2026 or beyond, the SALT cap is one piece of a bigger picture that includes pricing strategy, market timing, tax planning, and the practical realities of moving. Working through the full math with a listing agent and a CPA — separately, before listing — produces a clearer view of net proceeds and after-tax outcomes than either professional could provide alone. When the time is right to walk through what a sale could look like for a specific home, the door is open.
By Eric Berman, REALTOR® | The Eric Berman Team at Compass
Eric Berman | Long Island & Queens REALTOR® | Compass 1468 Northern Blvd, Manhasset, NY 11030 (917) 225-8596 | eric@ericbermanteam.com | theericbermanteam.com
