December 1, 2025
For Washington State taxpayers, the "One Big Beautiful Bill" Act (OBBBA), Public Law No. 119-21, enacted in 2025, is a potential game-changer specifically because of the SALT (State and Local Tax) cap increase to a $40,000 maximum deduction.
Since Washington has no state income tax, Washington taxpayers must rely on deducting sales tax and property tax when calculating SALT itemized deductions. However, under the old $10,000 cap, most homeowners in the Seattle area or other high-cost parts of the state exceed that limit with property taxes alone, leaving their sales tax deduction useless.
Now, with a $40,000 ceiling, taxpayers have significant room to stack property tax and sales tax deductions on their returns. Taxpayers should see if their combined itemized deductions exceed the new 2025 Standard Deduction ($15,750 Single / $31,500 Joint). Here is how to reevaluate your strategy.
1. Optimize Your Sales Tax Deduction (The "Big Ticket" Strategy)
Because you can deduct actual sales tax paid on major purchases, December is the time to make strategic buying decisions if you want to get extra deductions in 2025.
The Opportunity: If you buy an expensive vehicle or make substantial home renovations, you can separately deduct the sales tax on these large purchases as itemized deductions.
The Strategy: If you are on the fence about buying a vehicle, doing it before Dec 31 could tip you over the threshold to itemize.
Note: These deductions can be combined with the separate "No Tax on Auto Loan Interest" deduction (which you get even if you don't itemize). Taxpayers get both benefits: the sales tax helps you itemize, and the auto loan interest is deducted separately before the itemized deduction line.
2. Review Property Tax Payments
The limit is higher: In King, Pierce, and Snohomish counties, property taxes often exceed $10,000. Previously, anything over $10k was "wasted" for tax purposes. Now, you can deduct the full amount (up to the $40k combined cap).
Action: Verify that all 2025 assessments are paid. (Note: Pre-paying 2026 property taxes is generally not deductible by the IRS unless the tax has already been assessed and billed by the county, which is rare in Washington before January).
The following is an example scenario for a couple filing married jointly under the older $10,000 SALT cap and the newer $40,000 cap.
Expense | Scenario A (Old $10k Cap) | Scenario B (New $40k Cap) |
|---|---|---|
Property Tax | $14,000 | $14,000 |
Sales Tax | $6,000 | $6,000 |
Allowed SALT Deduction | $10,000 (Capped) | $20,000 (Full amount) |
Mortgage Interest | $12,000 | $12,000 |
Charity | $2,000 | $2,000 |
TOTAL Itemized | $24,000 | $34,000 |
Vs. Standard Deduction | Take Standard ($31.5k) | Itemize ($34k) |
Result | No Benefit | Reduce Taxable Income by $2,500 |
Washington taxpayers who qualify for itemizing deductions under OBBRA should plan on claiming these tax savings.
For further reading, see:
https://www.congress.gov/bill/119th-congress/house-bill/1/text
DISCLOSURE:
Investment advisor representative of securities and investment advisory services offered through Cetera Wealth Services LLC, member FINRA/SIPC, a broker/dealer, and Registered Investment Advisor. Cetera is owned separately from any other named entity. In addition, some Investment advisory services are offered through Fulcrum Wealth Advisors, LLC. Fulcrum Wealth Advisors, LLC is a registered investment advisor in the State of Washington.
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