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Okay, so you haven’t done your taxes yet. That might have worked in your favor this year. Because now you’re reading this post before you file.

A significant federal tax change took effect for the 2025 tax year, and if you owned, bought, or sold a home in Austin last year, it’s worth exploring before you file. The SALT deduction cap — something that had been quietly limiting Texas homeowners for years — just got a major update. Let’s take a closer look.

First, What Is the SALT Deduction?

SALT stands for State and Local Taxes. It’s a federal deduction that lets you subtract certain taxes you’ve already paid to state and local governments from your federal taxable income. We’re talking about property taxes, sales taxes, and state income taxes.

Since Texas has no state income tax (one of the reasons so many people love it here), SALT for most Texans comes down to property taxes and sales taxes. And in Austin and the surrounding metro? Property taxes are no small number.

Here’s where it gets interesting:

The $10,000 Problem (And Why It Hurt Texas)

Back in 2018, the Tax Cuts and Jobs Act capped the SALT deduction at $10,000 per return. For a lot of Texas homeowners, especially those in high-value neighborhoods with property tax bills that blow past that threshold, this cap essentially erased a chunk of a deduction they used to be able to take in full.

That cap stayed at $10,000 for seven years.

What Changed for 2025

In July 2025, Trump signed the One Big Beautiful Bill Act into law. Among its provisions: the SALT cap jumped from $10,000 to $40,000 for the 2025 tax year. And because it was made retroactive to January 1, 2025, it applies to every homeowner filing their 2025 return right now.

The higher cap is in place for tax years 2025 through 2029, with a 1% annual increase each year, before reverting back to $10,000 in 2030. So, this is a five-year window, and 2025 is the first (and biggest) jump.

Here’s where to take note:

• The new cap is $40,000 for most filers (or $20,000 if you’re married filing separately)

• The benefit begins to phase out if your Modified Adjusted Gross Income (MAGI) exceeds $500,000

• At $600,000 MAGI, the cap effectively reverts back to $10,000

• You can only use this deduction if you itemize — not if you take the standard deduction

  

   

Photo by Pete Alexopoulos on Unsplash

What This Means for Austin Homeowners

Let’s bring this home (hehe).

Texas property taxes are among the highest in the country. Travis County homeowners with meaningful property values often see annual tax bills well above $10,000. Under the old cap, everything over that threshold was simply lost. Under the new rules, you have room to deduct up to four times that amount.

For a household earning under $500,000 with a property tax bill of, say, $18,000 or $22,000, this is the first year in a long time that the full amount might actually be deductible (if you itemize).

If you bought a home in 2025, you may have paid prorated property taxes at closing, plus additional property taxes through the year. That combined figure could be significant. If you sold a home, the same logic applies to the taxes you paid during the year before closing.

Either way: this is a year to run the numbers before you default to the standard deduction.

The Balanced Perspective

The Good

• Homeowners with property tax bills between $10,000 and $40,000 now have a real deduction opportunity they didn’t have before

• This change is retroactive to January 1, 2025 — no action was needed last year to capture it

• The window runs through 2029, giving homeowners several years to plan around the higher cap

• Aside: Mortgage interest deduction limits are now permanent (another win for homeowners in the same legislation)

The Caution

• The SALT deduction is only available if you itemize. For 2025, the standard deduction also increased ($15,750 for single filers; $31,500 for married filing jointly) — so itemizing isn’t automatically better. It depends on your full picture

• The higher cap is temporary. Without further legislation, it reverts to $10,000 in 2030

• If your MAGI is between $500,000 and $600,000, the phaseout math gets complicated. Don’t guess — work with your CPA

• A large SALT deduction could interact with the Alternative Minimum Tax (AMT) under certain circumstances. Another reason to consult a tax professional

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Practical Takeaways Before You File

• Pull together your 2025 property tax statements. If you bought or sold, check your closing disclosure for the property taxes paid at closing. These count.

• Compare itemizing vs. the standard deduction. Ask your CPA or tax preparer to run both scenarios. This year, more homeowners may find the math tips toward itemizing.

• Check your MAGI. The $500,000 phaseout threshold matters. If you’re in that range or above, the calculation changes.

• Don’t forget sales tax. Since Texas has no state income tax, you can choose to deduct sales taxes instead. If you made any large purchases in 2025 (hello, new appliances or a vehicle for your garage), that could add up.

• Forward-plan for 2026-2029. Now that you know the window exists, you can factor the SALT deduction into timing decisions on property tax payments and major purchases in the coming years.

Bottom Line

For Austin homeowners who have been quietly getting capped out at $10,000 for years — this is worth your attention.

It’s not a guarantee you’ll owe less. It’s not a one-size-fits-all benefit. But it is a strategy lever, and strategy is exactly what this market asks for right now.

Go in with more understanding of your options. And maybe hold off on filing for just a few more days until you’ve had a chance to run the numbers.

Information for this post sourced from my subject knowledge and this article at Realtor.com.

Have questions about how the new tax changes intersect with your upcoming home purchase or sale? I’m not a CPA (and you should absolutely talk to one), but I can help you understand the real estate side of the equation. Let’s talk through your timeline.