If you own a home in Westchester County or Chappaqua, you’ve probably heard plenty about the SALT deduction over the last few years. It’s one of those policy topics that directly affects your wallet but is easy to tune out—until tax time rolls around.
Let’s break down what the SALT deduction actually is, how it has evolved, what the current rules look like in New York State, and why it matters for today’s Westchester Real Estate and Chappaqua Real Estate markets.
What Is the SALT Deduction?
The SALT deduction—short for State and Local Taxes—allows homeowners to deduct the state and local taxes they pay from their federal taxable income.
This includes:
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Property taxes on your home
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State income taxes (or, in some cases, sales taxes)
If you itemize deductions on your federal tax return instead of taking the standard deduction, the SALT deduction can reduce your federal tax bill—sometimes by thousands of dollars.
Before 2018, there was no cap on how much state and local tax you could deduct. But that all changed with the Tax Cuts and Jobs Act (TCJA), which limited the total deduction to $10,000 per household ($5,000 if married filing separately).
That cap hit high-tax states like New York the hardest—especially places like Chappaqua and Westchester County, where property taxes alone often exceed $20,000 a year.
How the SALT Deduction Has Changed
For years, New York homeowners and elected officials have been pushing to raise or repeal the SALT cap. And finally, in 2025, Congress passed a bill that temporarily increases the deduction limit for the first time in years.
Here’s how the new rules look:
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The cap rises to $40,000 for 2025 ($20,000 if married filing separately).
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The limit increases slightly each year—by 1% annually—through 2029.
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Once a household’s Modified Adjusted Gross Income (MAGI) exceeds $500,000, the larger deduction begins to phase out.
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By around $600,000 of income, the benefit disappears, reverting back to the original $10,000 limit.
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Unless Congress acts again, the higher cap expires after 2029, and we’re back to $10,000 in 2030.
This temporary change brings real relief to many Westchester homeowners—especially those who pay significant property taxes but fall below that $500,000 income threshold.
New York’s Workarounds: PTET and ECEP
Even before the federal change, New York introduced a few clever “workarounds” to help residents capture some of that lost tax benefit.
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Pass-Through Entity Tax (PTET):
Owners of S-corporations or partnerships can elect to pay New York income tax at the business level rather than the personal level. That business-level tax is fully deductible federally, and the owner then gets a credit on their personal NY return. This move helps business owners sidestep the $10k SALT limit altogether. -
Employer Compensation Expense Program (ECEP):
This optional program allows employers to pay a state payroll tax on wages above $40,000 per employee. It’s deductible as a business expense and can reduce employees’ personal state income taxes. While not as widely used, it’s another example of how New York has tried to soften the blow of the federal SALT cap.
These programs remain in place—and can work in tandem with the new, higher federal deduction cap.
What the SALT Deduction Means for Westchester and Chappaqua Homeowners
If you’re a homeowner in Chappaqua, Armonk, Briarcliff Manor, or anywhere in Westchester, the SALT deduction matters more than most people realize.
Let’s look at a real-world example:
Example 1: Family in Chappaqua
Property Taxes: $22,000
NY State Income Tax: $18,000
Total SALT Paid: $40,000
Under the old rules, you could only deduct $10,000.
Under the new 2025 rules, you can now deduct up to $40,000, saving thousands on your federal tax bill—depending on your income and itemization level.
That’s a meaningful difference, especially in communities where property taxes are consistently among the highest in the nation.
How the SALT Deduction Impacts Local Real Estate
The increased SALT cap is more than just a tax headline—it can actually influence buyer behavior and market trends in places like Westchester.
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Buyers may have more purchasing power: When buyers can deduct a larger portion of their property taxes and state income tax, their after-tax cost of ownership decreases. That can make a $1.5 million home with $30,000 in annual property taxes feel more affordable.
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High-tax towns become more competitive again: Areas like Chappaqua, Scarsdale, and Larchmont—where property taxes are steep but schools and amenities are top-tier—may see increased buyer interest.
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Sellers can highlight after-tax costs: In your listing materials, showing what those taxes look like after the SALT deduction can help soften sticker shock and attract more qualified buyers.
For Westchester Real Estate, this could mean steadier demand even at higher price points—at least while the expanded deduction is in place.
Planning Ahead: The SALT Deduction Reverts in 2030
Unless Congress steps in, the expanded SALT deduction is temporary.
That means:
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The $40,000 cap phases out after 2029.
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The limit returns to $10,000 starting in 2030.
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Buyers and homeowners should plan accordingly—especially those considering major home improvements, refinances, or relocations.
If you’re planning to buy or sell in the next few years, it’s smart to understand how the tax landscape might shift and factor it into your timing and financial planning.
Action Steps for New York Homeowners
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Re-evaluate whether you should itemize.
With a higher SALT cap, it may now make sense to itemize again—especially if you pay significant Westchester property taxes and mortgage interest. -
Run the numbers with your CPA.
The new cap interacts with income thresholds, so your household income could determine whether you benefit fully, partially, or not at all. -
Stay below the phase-out threshold if possible.
Strategic timing of income, charitable contributions, or retirement contributions may help you stay under the $500,000 MAGI threshold. -
For business owners:
Look into the PTET election early each year—typically by March 15—to capture potential federal deductions. -
For sellers:
Be ready to show buyers what their after-tax cost of ownership could look like under the current rules. It can help justify property taxes that might otherwise seem intimidating.
The Bottom Line
The SALT deduction is more than just a line on your tax return—it’s a key factor in understanding home affordability in high-tax regions like Westchester.
For many families, the expanded cap through 2029 will bring meaningful savings—and a bit of breathing room when it comes to federal taxes. But since it’s temporary, it’s also a reminder to plan smartly for the future.
At NestEdge Realty, we keep a close eye on how these tax changes affect our clients. Whether you’re thinking about buying, selling, or simply reassessing your home’s value, understanding the SALT deduction is part of making an informed decision in today’s Westchester Real Estate market.
