The SALT Tax Scam: Are You Paying More While the Wealthy Save Millions? 💰🔥

If you’re tired of watching your hard-earned money disappear into state and local taxes (SALT), you’re not alone. With state tax rates as high as 13% in places like California and New York, high-income earners and business owners are feeling the pinch more than ever.

The good news? There are powerful strategies to minimize your SALT liabilities—legally and effectively. Whether you’re a homeowner, investor, or entrepreneur, this guide will show you how to navigate the SALT deduction limit and maximize your tax savings.

What Is the SALT Deduction, and Why Should You Care?

The State and Local Tax (SALT) deduction allows taxpayers to deduct certain taxes paid to state and local governments from their federal taxable income—reducing their overall tax bill.

However, the 2017 Tax Cuts and Jobs Act (TCJA) capped the SALT deduction at $10,000, meaning even if you pay $50,000+ in state and local taxes, you can only deduct $10,000 on your federal return. This cap disproportionately affects taxpayers in high-tax states like:

🗽 New York🌴 California💼 Illinois🏖️ New Jersey🏡 Connecticut

Without a solid tax strategy, high earners in these states can lose tens of thousands of dollars in deductions. But don’t worry—there are ways to work around this cap.

Top Strategies to Reduce Your State and Local Tax Bill

Now, let’s get to the good part—how to legally minimize your SALT burden!

1. Take Advantage of Pass-Through Entity (PTE) Workarounds

💡 Best for: Business owners with LLCs, S-Corps, or Partnerships

Many states have created SALT workaround laws allowing pass-through entities to pay state taxes at the business level instead of the individual level—effectively bypassing the $10,000 cap.

✅ How It Works:

Instead of paying state taxes personally, your business pays the tax and deducts it as a business expense.
You, as the owner, then receive a credit on your personal tax return for the taxes paid.

🚀 Which States Allow This?As of now, over 30 states have implemented Pass-Through Entity Tax (PTET) elections, including:

🔹 California🔹 New York🔹 Illinois🔹 New Jersey🔹 Massachusetts

Action Step: If you own a pass-through business, talk to your CPA about making a PTE election in your state—it could save you thousands in taxes!

2. Maximize Charitable Contributions (With a SALT Twist!)

💡 Best for: High-net-worth individuals and business owners

Some states allow you to donate to state-run charities or scholarship funds in exchange for a state tax credit. These contributions can then be deducted as a charitable donation on your federal return, sidestepping the SALT cap.

✅ Example:

A taxpayer in New York donates $50,000 to a state-approved charitable fund.
They receive a 90% state tax credit, reducing their NY state taxes.
They deduct the $50,000 as a charitable donation on their federal taxes, bypassing the SALT cap.

Action Step: Research if your state has a state-sponsored charitable contribution program that offers tax credits.

3. Relocate to a Tax-Friendly State (Residency Planning)

💡 Best for: Remote workers, retirees, and high-income individuals

If you’re paying $50,000+ in state taxes every year, moving to a tax-free state could be the best financial decision you ever make.

🚀 States with No Income Tax:🏝️ Florida🌵 Texas⛰️ Nevada🏜️ Arizona🌄 Tennessee

📌 What About Partial Residency?Many high-earners keep a home in a high-tax state but establish residency in a tax-free state like Florida or Texas.

✅ How to Establish Residency:

Spend at least 183 days in the low-tax state.
Get a driver’s license and voter registration in the new state.
Move financial and legal documents (banking, insurance, etc.).

💡 Pro Tip: Some states (like New York) aggressively audit taxpayers who claim to have moved. Keep detailed records to prove your residency shift.

4. Bunch Your Deductions to Beat the SALT Cap

💡 Best for: Homeowners and high-income earners who still itemize deductions

Since the SALT deduction is capped at $10,000, one effective strategy is bunching deductions.

✅ How It Works:

Instead of paying property taxes in December and again in January, pay both in the same year to maximize deductions.
If possible, prepay estimated state taxes before year-end.
Combine charitable donations, medical expenses, and mortgage interest to exceed the standard deduction ($27,700 for married filers in 2024).

📌 Example:By shifting deductions into one tax year, you may be able to itemize one year and take the standard deduction the next.

5. Invest in Tax-Free Municipal Bonds

💡 Best for: Investors looking for passive income without high state taxes

Municipal bonds, or “munis,” are a tax-free investment that pays interest income exempt from federal (and often state) taxes.

✅ Why It Works:

Interest earned from bonds issued by your state is usually tax-free at both federal and state levels.
High-income investors can avoid capital gains tax by holding bonds long-term.

📌 Example:A California resident in the 37% tax bracket earns $50,000 in muni bond interest. Instead of losing up to $18,500 in taxes, they keep 100% of their earnings.

Final Thoughts: Take Control of Your SALT Tax Strategy

State and local taxes don’t have to drain your wealth—with the right strategy, you can legally reduce your tax burden and keep more of what you earn.

✅ Own a business? Use the PTE election to bypass the SALT cap.✅ High-net-worth? Take advantage of state-sponsored charitable programs.✅ Hate paying taxes? Consider moving to a tax-friendly state.✅ Investing for the future? Buy tax-free municipal bonds.