Businesses face new challenges under SALT tax changes

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You’ve most likely heard the acronym SALT being used recently, but what does it mean, why is it timely, and how does its impact shake out for you and your business?

Joshua B. Beisker, an attorney who is a partner at Underberg & Kessler LLP, where he chairs the estates and trusts and tax law practice groups and co-chairs the corporate and business practice group, explains the SALT – which stands for state and local tax – has been in the news most recently due to the newly enacted One Big Beautiful Bill (OBBB), which was signed July 4, 2025.

“Under the newly enacted One Big Beautiful Bill, the SALT deduction cap has temporarily been raised from $10,000 to $40,000 for households earning up to $500,000 (phasing out above that), offering short‑term relief for many in high‑tax states but reverting to $10,000 starting in 2030 amid ongoing debates over fairness and fiscal costs,” Beisker said.

He further explains that the most consequential recent SALT change is the temporary increase of the deduction cap to $40,000 (through 2029), which substantially benefits high‑earners in high‑tax states while creating sharp phase‑out thresholds that can raise marginal tax rates significantly and prompting complex planning tactics like multi‑trust strategies.

“Businesses with multi-state operations should prioritize monitoring federal restrictions on SALT workaround strategies for pass-throughs, new deductions at the entity level, shifts to single-factor apportionment in key states, emerging service-sector surtaxes, and evolving rules around digital and transactional taxation, all of which materially impact tax liability, compliance burden, and location strategy,” Beisker said.

He and his team are most closely watching New York, California, Massachusetts, Arkansas, and Colorado for their evolving PTET policies, apportionment and sourcing updates, and tax planning shifts.

When asked for proactive steps businesses can take now to prepare for SALT shifts, Beisker said: “Review your nexus, apportionment, and PTET strategy now, and prepare for multiple federal SALT cap outcomes so that businesses can align their internal systems and staffing to anticipate aggressive state enforcement and ongoing legislative volatility so that if and when changes come, the businesses hopefully will have put in place the appropriate action items in anticipation of any such changes.”

Patrick Cox, a partner with Nixon Peabody LLP and a member of the firm’s tax team, says there’s been a continued evolution of SALT post-Wayfair (a 2018 Supreme Court decision that allowed states to require online and remote sellers to collect sales tax even without a physical presence) and post-COVID, two seminal events that have caused states to reimagine their tax base and how remote activities should be taxed.

“More and more, states are scrutinizing remote-work arrangements in the context of payroll taxes,” Cox said.

Emerging SALT changes that NY-based businesses with multi-state operations need to be most aware of include New York’s Convenience of the Employer Rule, Cox said, which continues to be an irritant to other states, especially the bordering states of New Jersey and Connecticut, and the constitutionality of the rule continues to be challenged.

“New York-based businesses need to know about their state payroll tax withholding obligations under this rule and the risks associated with over-withholding for their remote workforce,” he said.

When it comes to proactive steps businesses can take now to prepare for SALT shifts, Cox says businesses should continue to update their internal controls and protocols when it comes to remote workers and other state nexus issues.

“It is not always safe to rely on Professional Employer Organizations (PEOs) and other payroll providers when it comes to payroll issues,” Cox said. “Rather, businesses should consult with a tax lawyer or accountant.”

Caurie Putnam is a Rochester-area freelance writer.