What Is the SALT Cap and How It May Be Affecting Your Business

Let’s look at what’s happening, how it affects pass-through businesses, and the questions that can help you figure out your next move.

The SALT Cap explained

What is the SALT deduction cap?
SALT stands for State and Local Taxes—things like income tax, property tax, and sales tax. Until 2018, you could deduct the full amount from your federal taxes. Now, you're limited to $10,000, no matter how much you actually pay.

Why does this matter for your business?
If you’re a freelancer or solopreneur with a pass-through business, your business income shows up on your personal tax return. This means the SALT cap directly affects your personal deductions as a business owner—potentially leading to a higher federal tax bill, even if your income hasn't changed.

Can anything be done?
Yes. Some states offer a workaround called a Pass-Through Entity Tax (PTET). It allows your business to pay the tax instead of you, which may restore some of the deduction on your federal return. It’s not automatic, though—you’ll need to opt in and follow the rules carefully.

Questions SMBs Should Be Asking About the SALT Cap

Getting clear on your situation starts with asking smart, simple questions. These will help you decide whether it’s time to change how you handle your business taxes.

• Is the SALT cap increasing how much I owe in federal taxes?
  Compare past tax years—are you paying more than expected?
   
• How much is it really cutting into my take-home income?
  Could a different deduction setup save you money?
   
• Does my state offer a PTET workaround, and do I qualify?
  Have you checked if your business can opt in this year?
   
• Should I rethink how my business is structured or how I file?
  Could an LLC or S-corp setup give you better tax options?

What You Can Do Next to Implement Your SALT Cap Strategy

Once you've asked the right questions, it's time to take the next steps:

• Check your state’s PTET rules using Rocket Lawyer’s Copilot—it’s fast and easy.
• Compare tax scenarios to see the impact of opting in or restructuring.
• Ask a professional to walk you through your best options for reducing your tax bill.
• Review your business setup—your current structure might be costing you money.

Understanding how the SALT cap affects you is the first step. With the right tools and advice, you can make smarter choices—and keep more of what you earn.