{"id":28271,"date":"2026-02-16T01:55:19","date_gmt":"2026-02-16T01:55:19","guid":{"rendered":"https:\/\/diyhaven858.wasmer.app\/index.php\/earn-between-500k-and-600k-heres-why-you-need-to-watch-out-for-trumps-salt-torpedo-penalty-this-tax-season\/"},"modified":"2026-02-16T01:55:19","modified_gmt":"2026-02-16T01:55:19","slug":"earn-between-500k-and-600k-heres-why-you-need-to-watch-out-for-trumps-salt-torpedo-penalty-this-tax-season","status":"publish","type":"post","link":"https:\/\/diyhaven858.wasmer.app\/index.php\/earn-between-500k-and-600k-heres-why-you-need-to-watch-out-for-trumps-salt-torpedo-penalty-this-tax-season\/","title":{"rendered":"Earn between $500K and 600K? Here\u2019s why you need to watch out for Trump\u2019s \u2018SALT torpedo\u2019 penalty this tax season"},"content":{"rendered":"
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<\/div>\n<\/div>Nathan Howard \/ Getty <\/figcaption><\/figure>\n
Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.<\/em><\/p>\n
With tax season around the corner, some of America\u2019s highest earners have a new deduction rule to worry about thanks to President Trump\u2019s \u201cbig, beautiful bill.\u201d<\/p>\n
When the bill passed last summer, it came with a much higher limit on the federal deduction for SALT (state and local taxes) \u2014 but increasing the limit from $10,000 to $40,000 created an unfortunate loophole for households earning between $500K to $600K.<\/p>\n
This subset of high earners will face a tax penalty experts are calling a \u201cSALT torpedo,\u201d according to CNBC, since the phaseout for high earners could trigger an artificially inflated tax rate (1).<\/p>\n
As Keebler & Associates CPA Robert Keebler wrote on LinkedIn (2), \u201cthose with AGI [adjusted gross income] of over $500,000 will be subject to an unpleasant phaseout that will increase one\u2019s effective tax rate by 30%.\u201d<\/p>\n
While the $30,000 increase on the SALT deduction limit seems helpful \u2014 because the 30% phaseout kicks in between $500K and $600K \u2014 you lose 30% of every dollar of benefit if your total household income falls within that bracket.<\/p>\n
For some, this could create an effective tax rate as high as 45.5% on income above the $500K limit, Keebler explained.<\/p>\n
The change has created major debate in Washington, as some lawmakers from higher\u2011tax states argue the cap is an unfair penalty on their residents. Proponents of the change argue that the rule gives states greater authority to set their tax rates (3).<\/p>\n
Here\u2019s how you can reduce the impact of Trump\u2019s new SALT limit on your tax bill.<\/p>\n
While it\u2019s frustrating to think about a sudden, massive increase in your tax bill, there are ways to ensure your taxable income remains below the $500K threshold, which would prevent the torpedo from kicking in.<\/p>\n
If you\u2019re just above the threshold, you can use tax strategies to reduce your taxable income and ensure you land below $500K \u2014 like avoiding mutual funds and instead focusing on tax-efficient ETFs in your taxable brokerage accounts.<\/p>\n<\/p><\/div>\n