The massive tax-and-spending package signed into law last month brings a broad range of permanent and temporary taxpayer-friendly changes to high-net-worth individuals. One issue that drew outsize attention was whether the bill would provide significant relief for residents of high-tax states—especially those who live in the business and financial center that is New York City.
Although several of the package’s provisions provide clarity and create new planning opportunities for these taxpayers, it’s important to consider how residents in some states, especially New York, are grappling with their still-significant tax burdens and how they might respond to the law. Fortunately, there are new provisions that may allow certain taxpayers to plan ahead.
First, for New York City residents, the preservation of the pass-through entity tax is a meaningful win for business owners, who can continue deducting state and local taxes at both the state and city levels. Those without pass-through income and who earn between $500,000 and $600,000 have fewer options for preserving the full SALT deduction unless they explore strategies such as establishing non-grantor trusts.
The new law preserves the PTET without restriction and introduces a five-year increase to the SALT deduction cap. However, the full $40,000 deduction phases down when a taxpayer’s modified adjusted gross income exceeds $500,000 for single taxpayers and married couples filing joint tax returns. It continues to phase out by 30% of the taxpayer’s excess income above this limit and resets at $10,000 when income reaches $600,000 or greater.
For high-net-worth New Yorkers near the $500,000 to $600,000 income threshold, year-end planning can help preserve the full SALT deduction. Realizing losses, accelerating deductions, or adjusting the timing of income (especially from investments or bonuses) may help keep taxable income below the cutoff.
But there are limitations. The new law deals a significant blow to taxpayers with considerable state and local taxes who may end up subject to higher effective income tax rates even when they have ample itemized deductions to offset income.
Additionally, taxpayers’ ability to elect into a PTET regime to circumvent the SALT deduction limitations and pay state taxes as fully deductible business expenses is limited to those who operate pass-through entities.
Those with corporations also aren’t eligible for this benefit because the PTET election is only available to owners of S corporations and partnerships, not C corporations. But that doesn’t necessarily make the corporate structure a disadvantage, especially now that the qualified small business stock exclusion has expanded from $10 million to $15 million, offering a major capital gains benefit for founders and investors in qualifying C corporations.
Rather than restructuring just to access PTET, taxpayers should consider the new law’s broader implications. The right entity choice depends on long-term goals, growth plans, and eventual exit strategy. Structural changes can carry lasting tax consequences, so decisions should be made in consultation with an adviser and a full view of the tax landscape.
Wealthy taxpayers in high-tax states still have some opportunities to maximize the higher SALT deduction in tax years 2025 through 2029 through effective estate and trust planning. Taxpayers may consider deferring income and accelerating deductions when their modified adjusted gross income is close to the $500,000 income threshold and making use of different trust vehicles.
Taxpayers in New York City might consider gifting some assets to an irrevocable non-grantor trust, which the tax code treats as a taxpayer separate and distinct from the grantor (our original taxpayer).
This means the grantor neither reports income generated by the tax assets nor pays tax on that amount. Instead, the trust itself files a separate tax return and is responsible for paying federal and state taxes on trust income from trust assets. For high-net-worth individuals, distributing income between themselves and properly established non-grantor trusts (each under the $500,000 income threshold) can multiply the SALT deduction.
This strategy involves extra tax filings, administrative costs, and legal complexity, so it’s important to weigh potential savings against these burdens. The approach works best for predictable income sources, such as rental properties, where bonus depreciation can also help reduce taxable income. In such cases, both the individual and trusts can separately claim SALT deductions, effectively multiplying the benefit.
These gifting strategies also preserve tax efficiency by allowing grantors to remove assets and future appreciation from their estates, avoiding long-term capital gains tax of up to 23.8% on the sales of those assets. In 2025, individuals may gift up to $19,000 to as many individuals as they choose without triggering a gift tax liability. For married couples filing jointly, the gift tax exclusion is $38,000.
For high-net-worth individuals, these strategies blend federal and state tax planning, especially with the fiscal package raising the federal estate tax exemption to $15 million per person. This has reduced urgency for large lifetime gifts, but estate tax rules remain uncertain and could change. Those with rapidly appreciating assets may still benefit from gifting now to lock in favorable terms.
While non-grantor trusts can aid SALT planning, their complexity and costs require careful consideration. Taxpayers may also opt to bundle charitable deductions by combining two or more years of giving into a single year, “pushing” deductions above the standard deduction and enabling itemization to maximize tax benefit.
This strategy can mitigate tax impact in years when taxpayers have unusually high swings in income due to liquidity events, equity compensation, or investment gains. As the tax year ends, it’s crucial to review income projections with your adviser. If you’re likely to exceed SALT deduction limits, accelerating charitable gifts can reduce taxable income and increase tax benefits.
Timing matters, too. Giving earlier in the fourth quarter instead of December can improve savings, especially when combined with donor-advised funds or non-grantor trusts. In high-tax states such as New York, thoughtful planning around charitable giving is essential to avoid leaving valuable tax benefits on the table.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Author Information
Michael Brennan is a director of tax services with Berkowitz Pollack Brant in New York, where he provides tax consulting and advisory services to high-net-worth families and businesses.
Write for Us: Author Guidelines
To contact the editors responsible for this story: