NEW SALT (State and Local Tax) deduction cap

President Donald Trump signed the “One Big Beautiful Bill Act” into law on July 4, 2025.
This new legislation significantly changes the State and Local Tax (SALT) deduction cap for individual taxpayers.


Here’s a breakdown of the new SALT deduction cap:
Increased Cap: The SALT deduction limit has increased from $10,000 to $40,000 for tax year 2025.
Income Threshold and Phase-out:
The full $40,000 deduction is available to households with a Modified Adjusted Gross Income (MAGI) of $500,000 or less ($250,000 for married couples filing separately).
-For those with MAGI exceeding these thresholds, the $40,000 cap is gradually reduced at a 30% rate, meaning the deduction decreases by 30 cents for every dollar over the limit.
-The deduction never falls below $10,000, even for the highest earners.
MAGI is calculated by adding back certain components to your Adjusted Gross Income (AGI), such as foreign earned income and housing costs.
*For example, if your MAGI is $550,000, you exceed the $500,000 threshold by $50,000. The deduction is reduced by 30% of $50,000 ($15,000), leaving you with a $25,000 SALT deduction ($40,000 – $15,000).
Households with MAGI above $600,000 are limited to the $10,000 SALT deduction.
-Annual Adjustments: The SALT cap and the income thresholds for the phase-out will increase by 1% annually through 2029.
Sunset Provision: The higher SALT deduction cap is temporary and is scheduled to revert to the $10,000 limit in 2030, according to SmartAsset.com.
-Important Considerations:
Itemization: You must itemize your deductions to claim the SALT deduction. If your itemized deductions (including SALT) do not exceed the standard deduction, it’s more beneficial to take the standard deduction.
Benefits: The increased SALT cap will primarily benefit individuals and families in high-tax states with incomes at or below $500,000. Many low- and middle-income households may find that the increased standard deduction is still more advantageous.


“SALT Torpedo”: Tax experts are warning of a potential “SALT torpedo” or artificially high tax rate for individuals with MAGI between $500,000 and $600,000, as the deduction phases out rapidly in this range.
Business Taxes: The changes to the SALT deduction generally do not apply to businesses. According to Optima Tax Relief, businesses may continue using existing deduction rules or state workarounds, such as Pass-Through Entity Taxes (PTETs).

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Understanding Irrevocable Life Insurance Trusts

Way to save taxes for your heirs.

Irrevocable Life Insurance Trusts (ILITs) are a valuable estate planning tool that can help individuals in New York and other states minimize their estate tax liability. By transferring ownership of a life insurance policy to an ILIT, the death benefit can be received by beneficiaries outside of the insured’s estate, potentially avoiding significant estate taxes.

Key Benefits of ILITs in New York:

Estate Tax Reduction: ILITs can significantly reduce the size of your taxable estate, potentially saving your beneficiaries substantial amounts of money in estate taxes.
Flexibility: ILITs can be customized to meet your specific needs and goals, allowing you to control how the death benefit is distributed and used.
Asset Protection: ILITs can also provide asset protection by keeping the death benefit outside of your estate, shielding it from potential creditors or lawsuits.
Considerations for New York Residents:

New York Estate Tax: While New York has a relatively high estate tax rate, the state also offers a lifetime exemption. By effectively utilizing an ILIT, you can transfer assets out of your taxable estate and potentially avoid New York estate taxes.
Three-Year Clawback Rule: New York has a three-year clawback rule, which means any gifts made within three years of death may be included in the deceased person’s estate. It’s essential to consider this rule when planning your ILIT strategy.
How to Establish an ILIT:

Consult with a Professional: An estate planning attorney can help you create an ILIT that is tailored to your specific needs and goals.
Transfer Ownership: You will need to transfer ownership of the life insurance policy to the ILIT. This is considered a gift and may have gift tax implications.
Name Beneficiaries: Designate the beneficiaries who will receive the death benefit.
Consider Funding: You may need to fund the ILIT with cash or other assets to ensure that the death benefit can be paid out.
Conclusion:

ILITs can be a powerful estate planning tool for New York residents. By understanding the benefits and considerations involved, you can make informed decisions to protect your assets and minimize your estate tax liability. Consulting with an estate planning attorney is essential to ensure that your ILIT is properly structured and meets your specific needs.

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IRS shares new warning signs of incorrect claims for Employee Retention Credit

The IRS recently shared five new warning signs of incorrect claims by businesses for the Employee Retention Credit. The new list comes from common issues the IRS has seen while reviewing and processing ERC claims.

Aggressive promoters convinced many businesses to claim this pandemic-era credit when they’re not eligible. The IRS urges businesses to carefully review their filings to confirm their eligibility and ensure their claim doesn’t include these warning signs or other mistakes.

Businesses should talk to a trusted tax professional and resolve incorrect claims through the IRS’s claim withdrawal program or the second ERC Voluntary Disclosure Program to avoid issues such as audits, repayment, penalties and interest.

The five new red flags cover these areas:

Essential businesses during the pandemic that could fully operate and didn’t have a decline in gross receipts. Promoters convinced many essential businesses to claim the ERC when, in many instances, essential businesses weren’t eligible because their operations weren’t fully or partially suspended by a qualifying government order.
Businesses unable to support how a government order fully or partially suspended business operations. Whether a business was fully or partially suspended depends on its specific situation. When asked for proof on how the government order suspended more than a nominal portion of their business operations, many businesses haven’t provided enough information to confirm eligibility.
Businesses reporting family members’ wages as qualified wages. If business owners claimed the ERC using wages paid to related individuals, those claims are likely for the wrong amount or ineligible.
Businesses using wages already used for Paycheck Protection Program loan forgiveness. Businesses can’t claim the ERC on wages that they reported as payroll costs to get PPP loan forgiveness.
Large employers claiming wages for employees who provided services. Large eligible employers can only claim wages paid to employees who were not providing services. Many large employers’ claims incorrectly included wages for employees who were providing services during these periods.
The IRS previously issued warnings involving these seven areas:

Too many quarters being claimed.
Government orders that don’t qualify.
Too many employees and wrong calculations.
Businesses citing supply chain issues.
Businesses claiming ERC for too much of a tax period.
Businesses didn’t pay wages or didn’t exist during eligibility period.
Promoter says there’s nothing to lose.

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The Educator Expense Deduction can help offset out-of-pocket classroom costs

The Educator Expense Deduction lets eligible teachers and administrators deduct part of the cost of technology, supplies and training from their taxes. They can claim this deduction only for expenses that weren’t reimbursed by their employer, a grant or other sources.

Who is an eligible educator
The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

Things to know about this deduction
Educators can deduct up to $300 of certain trade or business expenses that weren’t reimbursed. If two married educators are filing a joint return, the limit rises to $600. These taxpayers can’t deduct more than $300 each.

Qualified expenses are amounts the taxpayer paid themselves during the tax year.

Some of the expenses an educator can deduct include:

Professional development course fees.
Books and supplies.
Computer equipment, including related software and services.
Other equipment and materials used in the classroom.
COVID-19 protective items to stop the spread of the disease in the classroom.
More Information:

Topic No. 458, Educator Expense Deduction
Publication 5349, Tax Planning is for Everyone

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Beware of scammers posing as the IRS

They never call you !!!!! or text you !!!!!

Identity thieves may try to contact taxpayers through fraudulent calls, emails, texts and social media messages pretending to be the IRS. Here’s how taxpayers know when it’s the IRS that contacts them.

Email, text, and social media
The IRS will mail a letter or notice before calling or emailing.

The IRS does not:

Send unexpected or unsolicited text messages to taxpayers.
Initiate contact with taxpayers by email, text message, or through social media.
Send messages that ask for personal or financial information, especially when it comes to a tax refund.
Common IRS-related online scams include:

Phishing emails sent to taxpayers.
Fake IRS social media accounts that contact taxpayers about a fake bill, grant, or refund.
Text messages are sent to taxpayers for fake “tax credits” or “stimulus payments.”
Scammers’ messages often direct taxpayers to click fraudulent links they claim are IRS websites or other online tools.

Phone calls
After mailing a notice or letter to a taxpayer, IRS agents may call to confirm an appointment or discuss items for a scheduled audit. Taxpayers should know that:

The IRS doesn’t leave pre-recorded, urgent or threatening messages. Scammers will tell victims that if they do not call back, a warrant will be issued for their arrest. These calls are scams.
Private collection agencies that the IRS works with may call taxpayers to collect certain outstanding inactive tax liabilities, but only after sending written notice to the taxpayer and their representative.
The IRS and its authorized private collection agencies will never ask a taxpayer to pay using any form of pre-paid card, store, or online gift card. Taxpayers can review the IRS payments page at IRS.gov/payments for all legitimate ways to make a payment.
Letters and notices
A letter or notice is usually the first contact a taxpayer gets from the IRS contacts. If a taxpayer gets a suspicious letter or notice, they can check to see if it’s really the IRS:

Log in to their secure IRS Online Account to find a copy of the notice or letter.
Contact IRS customer service to verify it, if they weren’t able to do so in their Online Account.
Review IRS letters and notices at Understanding Your IRS Notice or Letter.
Confirm that collection notices from a private collection agency have the same Taxpayer Authentication Number as the Notice CP40 the taxpayer received from the IRS.
Visit Private Debt Collection Frequently Asked Questions to learn more about verifying a private collection agency.


Warning signs of a scam
If taxpayers get an unexpected letter, email, or text that claims to be from the IRS or another trusted source – like a bank, a credit company, or a tax software provider – here are some tell-tale signs that it’s a scam:

Spelling errors or incorrect grammar.
A link or attachment that with a slightly misspelled URL or an unusual one such as irs.com. All IRS links go to irs.gov.
A threatening or urgent request to pay now, to follow a link or to open an attachment.
Taxpayers who receive a request from the IRS in the mail or by phone can always contact IRS customer service to authenticate it.

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