President Trump’s tax bill increased the SALT deduction limit from $10,000 to $40,000, creating a loophole for households earning $500K to $600K. This subset of earners could face a “SALT torpedo” tax penalty, increasing their effective tax rate by 30%.
Some high earners could see an effective tax rate as high as 45.5% due to the SALT deduction changes. Lawmakers from higher-tax states argue the cap is unfair, while proponents say it gives states more control over tax rates.
To reduce the impact of the new SALT limit, focus on keeping taxable income below $500K. Strategies include avoiding mutual funds, investing in tax-efficient ETFs, and exploring tax benefits in commercial real estate like 1031 exchanges.
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If considering selling a property or investments, be cautious if your income is nearing the SALT phaseout range. Understanding multi-year tax projections can help determine the best timing for selling assets to avoid triggering the SALT torpedo tax penalty. Range offers wealth management services, including tax projections, to assist with investment decisions. Range offers 24/7 expert advice and personalized strategies for portfolio customization and wealth management. Take advantage of tax breaks under Trump’s new bill by booking a free demo with the Range team. Protect your income from extra taxes with sheltered assets, IRAs, and charitable contributions. Find a qualified advisor through Advisor.com for personalized financial guidance. Contact no-obligation call for advisor matching. Trusted sources and third-party reporting ensure credibility. (50 words)
Read more at Yahoo Finance: Earn between $500K and 600K? Here’s why you need to watch out for Trump’s ‘SALT torpedo’ penalty this tax season