A Renewed Blow in the SALT Wars and a Wake-Up Call for High-Income Professionals.
Congress is once again targeting high-income professionals in the name of tax reform. On May 22, 2025, the House of Representatives passed “The One, Big, Beautiful Bill,” which proposes sweeping changes to the Tax Cuts and Jobs Act (TCJA). While the headlines focus on extensions of the TCJA’s broad tax cuts, buried in the bill are provisions that quietly strike at key benefits for service professionals and investors.
The legislation would eliminate the Pass-Through Entity Tax (PTET) deduction for professionals in fields like law, accounting, consulting, financial services, and trading. These are the same “specified service trades or businesses” (SSTBs) that were already singled out in 2017’s TCJA by limiting their qualified business income (QBI) deductions.
The PTET workaround has been a crucial tool for many S-Corps and partnerships, allowing them to deduct state and local taxes (SALT) at the entity level and bypass the $10,000 SALT cap. Under the new bill, SSTBs would lose this option.
At the same time, the House bill raises the SALT deduction cap to $40,000—but then phases it out for high earners. The phase-out begins at $250,000 of income for single filers and $500,000 for joint filers, and the deduction eventually drops back to $10,000 for the highest earners. The result: high-income professionals, especially in high-tax states, would see little or no SALT relief.
Notably, the bill would also make permanent the TCJA’s increased exemption amounts for the Alternative Minimum Tax (AMT), which originally aimed to prevent middle-income taxpayers from getting caught in the AMT net. That may soften the blow slightly, but it doesn’t offset the broader loss of deductions. SALT will remain not deductible for AMT and increasing SALT caps might have limited effect if AMT is triggered.
As of early 2025, 36 states and New York City have PTET regimes in place, designed specifically to counter the SALT cap. If this bill passes, the effectiveness of those state-level strategies could be gutted for service professionals.
Traders, fund managers, and other investment professionals—especially those who qualify for trader tax status (TTS)—should prepare now. These changes could significantly alter 2025 tax planning. If the Senate passes a similar version of the bill, this would mark a major policy shift in how federal tax law treats pass-through income and professional service entities.
Darren Neuschwander, CPA contributed to this blog post.
See a longer version of this blog post on GreenTraderTax.
Robert A. Green, CPA, is CEO of GreenTraderTax.com. He specializes in tax strategies for traders and investment professionals.
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