With President Trump and Congress recently passing the "One Big Beautiful Bill," rewriting America's tax code for the near future, you’ve probably heard the phrase “SALT cap” being thrown around in the news. It's an important tax stipulation for real estate owners; if you own a home in an area with high state and local taxes (hence the acronym SALT), you can deduct some of that amount on Schedule A of your federal tax bill. The government imposes a hard "cap" of how much of that you can deduct; recently, that number went from $10,000 to $40,000.
Many property owners—especially landlords—wonder how it applies to rental properties. Is there still a limit to the amount of property tax that can be deducted on a home if it's a rental property, instead of a primary residence? Luckily for landlords and short-term rental owners, the answer is no.
If you own a residence that you rent—whether it's a short-term vacation rental or a long-term rental with a lease—you can deduct the full amount of property taxes you pay on each rental property, regardless of how high they are. Property taxes on rental homes are not claimed on Schedule A; instead it's Schedule E, as it's treated like a business. The SALT "cap" only applies to personal expenses like your primary home, not to taxes on rental properties.
While the House GOP and Trump-backed tax package does have important stipulations for rental property owners, including the return of 100% bonus depreciation, the SALT cap remains largely a non-issue for landlords.
What does SALT stand for?
SALT stands for “state and local taxes.” These can include:
- Property taxes
- State income taxes
- Local income taxes
- Sales taxes (in some cases)
Before 2018, taxpayers who itemized deductions on their federal tax return could deduct the full amount of these taxes from their taxable income. This meant homeowners in high-tax states could significantly reduce their federal tax bill.
However, in 2018 the Tax Cuts and Jobs Act (TCJA) introduced a limit on this deduction—what we now call the SALT cap.
What is the SALT cap?
The SALT cap is a limit on how much state and local taxes you can deduct each year on your federal return. Under the TCJA, that cap was set at $10,000 for individuals and married couples filing jointly, and $5,000 for married individuals filing separately.
This cap applies to the total of your deductible property taxes, state income taxes, and local income taxes when claimed as itemized deductions on Schedule A. It does not affect the standard deduction; it simply limits the amount of SALT deductions you can claim if you choose to itemize.
The recent change: Increase from $10k to $40k
In early 2025, Congress passed, and President Trump signed, a tax package that temporarily increased the SALT cap for personal deductions from $10,000 to $40,000 for certain taxpayers. This provision was part of a broader set of tax changes, widely referred to as the “One Big Beautiful Bill.”
For homeowners in high-tax states, this is a significant win—it allows more of your state and local taxes to be deducted on your personal return.
For landlords and short-term rental property owners, though, the change is less impactful. That’s because rental property taxes have always been treated differently for tax purposes, and the cap doesn’t apply to them.
Related reading: How the 'Big Beautiful Bill' impacts landlords
Why the SALT cap doesn’t apply to rental properties
Property taxes on rental homes, apartment buildings, and short-term rentals like Airbnb and VRBO are not subject to the SALT cap. That’s because they’re considered business expenses, not personal expenses.
This rule holds true regardless of:
- How many rental properties you own
- Whether you rent them long-term or short-term
- The state or local property tax rates
The IRS separates personal and business expenses in its tax code. The SALT cap is designed to limit personal itemized deductions on Schedule A. Rental property expenses, on the other hand, are part of your investment’s operating costs and are deducted in full on the business side of your return.
Because of this separation:
- Your primary home’s property taxes may be capped at $40k for deduction purposes.
- Your rental property’s property taxes are fully deductible, no matter how high they are.
This distinction is critical for real estate investors when calculating after-tax returns.
Example scenarios
Scenario 1: Primary residence in a high-tax state
You pay $12,000 in property taxes and $5,000 in state income taxes on your home. Under the old SALT cap, you could deduct only $10,000 of these combined taxes on Schedule A. Under the new $40,000 cap, you could deduct all $17,000.
Scenario 2: Rental property
You pay $12,000 in property taxes on a rental home. All $12,000 is deductible as a business expense on Schedule E. This was true under the $10,000 cap and remains true under the $40,000 cap.
Scenario 3: Mix of both
You have a $15,000 property tax bill on your primary home and a $20,000 bill across several rental properties. Your primary home’s deduction is subject to the SALT cap (now potentially $40,000), but your rental property taxes are fully deductible.
Why this matters for landlords and short-term rental owners
For landlords in high-tax areas, the ability to deduct 100% of rental property taxes can have a major impact on cash flow and return on investment. It can make investing in certain high-tax states more attractive, since you know those expenses will reduce your taxable rental income.
Short-term rental owners benefit in the same way. Even if you operate a vacation rental in a state with high property taxes, you can deduct the full amount against your rental income.
Potential future changes to the SALT cap
The $40,000 cap under the Big Beautiful Bill is not a permanent change—it could be adjusted or expire depending on future legislation. While it’s good news for many homeowners, landlords should keep in mind that their rental property deduction rules have been consistent through these policy shifts.
If Congress revisits the SALT cap in future tax negotiations, the key question for landlords will continue to be whether rental property expenses remain classified as business deductions rather than personal ones.
Related reading: Can you avoid capital gains tax on a rental property?
Planning ahead for tax efficiency
Understanding the difference between personal and business deductions is essential for tax planning. Landlords can leverage the unlimited deduction for rental property taxes to improve after-tax income, even if they face limits on personal deductions.
A few tips:
- Keep detailed records of all property tax payments for each property.
- Separate your personal and rental property expenses clearly.
- Consider the tax implications when deciding where to invest in new properties.
Protecting your investment
Taxes are just one part of your rental property’s financial picture. While you can fully deduct rental property taxes, protecting your property with the right insurance is equally important. At Steadily, we offer customized insurance solutions for landlords, whether you own a single family home, multi-family unit, or short-term rental. Get a landlord insurance quote today and safeguard your investment.
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