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Most small business owners I talk to have heard about SALT deductions—but few have the time (or desire) to wade through tax policy jargon to figure out what it really means for their bottom line. So, let’s cut through the noise.
The state and local tax (SALT) deduction allows you to deduct certain taxes paid to state and local governments—like income, sales, and property taxes—from your federally taxable income. For years, this deduction has been a valuable tool, particularly if you live or do business in a high-tax state. It’s one of those little levers that, when pulled correctly, can make a meaningful difference in how much of your money stays in your pocket.
Then came the Tax Cuts and Jobs Act (TCJA) of 2017. That’s when the IRS put a hard cap of $10,000 on SALT deductions for individuals. It’s a cap that’s scheduled to expire after 2025. Predictably, there’s plenty of debate about whether it should stick around, get lifted, or be eliminated altogether.
For small business owners, this isn’t just theoretical. Changes to SALT deductions could directly impact your cash flow, tax planning, and the financial certainty you’ve worked hard to build. Here’s what you need to know—and how to stay ahead of the curve.
What’s on the Table for SALT—and Why It Matters to Small Business Owners
If you’ve been running a business for more than a minute, you already know that most tax policy discussions are more about politics than practical planning. But when it comes to the SALT deduction, the proposals floating around Capitol Hill aren’t just theoretical—they’re the kind of changes that can mess with your cash flow if you’re not paying attention.
Here’s the rundown of what’s being debated:
The Nuclear Option: Total Repeal
One proposal would scrap the SALT deduction entirely. No cap. No deduction. Nothing. From a government revenue standpoint, it’s a big win—estimates suggest it could generate around $1 trillion over the next decade. For small business owners in high-tax states? That’s a hit straight to the bottom line.
The “Married People Get a Break” Plan
Another idea being kicked around is to keep the $10,000 cap but double it for married couples. Sounds fair, right? Maybe. But it comes with a price tag of about $100 to $200 billion over ten years, and it doesn’t really move the needle for single filers or businesses structured as pass-through entities.
The "Let’s Be Reasonable" Option
Some lawmakers are proposing raising the cap to $15,000 for individuals and $30,000 for married couples. That would make a bigger dent in your tax bill if you’re in a state like California, New York, or New Jersey. But it’s still limited relief—and it comes with a $500 billion price tag over the next decade.
For small business owners—especially if you’re running a sole proprietorship, partnership, or S Corp—these numbers matter. Why? Because pass-through income gets reported on your personal tax return. That means changes to SALT deductions could directly affect your taxable income, your quarterly estimates, and your overall financial strategy.
And if you’re running a business in a high-tax state? Buckle up. The wrong move here could leave you holding the bag on a higher federal tax bill.
How to Play Offense (Not Defense) on SALT Deduction Changes
When it comes to taxes—and SALT deductions in particular—waiting around to “see what happens” is not a strategy. It’s gambling. And if you’re running a small business, the house usually wins. The good news? You don’t need to rely on hope or guesswork. You need a plan.
Here’s how to stay ahead of the potential SALT shake-up and keep your financial certainty intact:
1. Know the Rules Before They Change
Tax policy moves slower than you think… until it doesn’t. One minute, you’re optimizing deductions; the next, you’re caught flat-footed with a surprise tax bill. So, make it a habit to stay informed. Whether that’s by subscribing to legislative updates or—better yet—working with a CPA (like Nth Degree CPAs, shameless plug) who stays on top of this for you, don’t be the last to know. Knowledge isn’t just power. It’s profit.
2. Reevaluate Your Business Structure (Yes, Again)
If you’re a pass-through entity (think S Corp, LLC, partnership), your personal tax return is where everything lands. That’s why changes to SALT deductions hit you harder. You might be structured one way because it made sense five years ago. But if the SALT cap changes, you could be leaving money on the table—or worse, paying more than you should.
Ask yourself:
- Should I be an S Corp, or does a C Corp make more sense now?
- Am I maximizing Qualified Business Income (QBI) deductions?
- Have my business priorities shifted since I last made this decision?
Spoiler alert: If you haven’t revisited your structure in the last year, it’s probably time.
3. Stress-Test Your Cash Flow
If you know me, you know I’m obsessed with cash flow. Why? Because you don’t go out of business from a lack of revenue. You go out of business from a lack of cash. If your SALT deduction shrinks (or disappears), how does that hit your cash flow? What’s the downstream impact on your budget, hiring plans, and debt servicing?
Now is the time to run the scenarios. Build a simple model or work with someone who can. What happens if your federal tax bill increases by $20K? $50K? More? Will it blow a hole in your budget? Or do you have a buffer?
4. Tighten Up Your Deductions and Documentation
If SALT goes away (or changes), the IRS is going to be looking elsewhere for revenue. That means more audits, more scrutiny, and less wiggle room. Make sure your other deductions—home office, business meals, travel, education—are bulletproof.
This is the time to:
- Get serious about record-keeping
- Make sure your bookkeeping is clean (no more commingling personal and business expenses)
- Document the business purpose for every deduction you take
You don’t have to be paranoid. But you do have to be prepared.
Conclusion
If there’s one thing I can guarantee about taxes (besides paying them), it’s that the rules are always up for renegotiation. SALT deductions? They’re just the latest variable in a game that never stops evolving.
But here’s the upside: You don’t need to predict the future. You just need to be ready to act when it happens. That’s the difference between reacting and engineering outcomes on your terms.
The smart business owners—the ones who stay solvent and sane—don’t wait for Congress to make up its mind. They build strategies that can flex with whatever comes next. So, while others are scrambling, you’re already executing Plan B. Because at the end of the day, it’s not about tax code whiplash. It’s about creating financial certainty, no matter what Washington decides.
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