With 2025 already halfway behind us, the spotlight on SALT has only grown brighter. The U.S. House of Representatives on May 22 approved a broad tax package that includes provisions that increase the state and local tax (SALT) deduction and preclude certain partnerships and S corporations from utilizing the state pass-through entity tax (PTET) regimes enacted by many states in the wake of the 2017 Tax Cuts and Jobs Act. The $10,000 SALT deduction cap, originally introduced as part of the 2017 Tax Cuts and Jobs Act (TCJA), is still set to expire at the end of this year.
This uncertainty, coupled with new or expanded state-level tax initiatives introduced earlier in the year, has made 2025 one of the most complex and fast-moving periods in SALT history. For taxpayers and businesses, this isn’t just a moment to “wait and see”, it’s time to get strategic.
Here are the five biggest SALT traps we’re seeing right now, along with what you can do to protect yourself or your organization during the second half of the year.
Trap #1: Assuming the SALT Cap Will Expire Without a Fight
Technically, the $10,000 cap on SALT deductions is scheduled to sunset at the end of 2025. But that doesn’t mean it will. Keep an eye on this legislation as Congress continues to mull the future of SALT deductions. With the 2024 election cycle still casting a long shadow over policymaking, many tax provisions, including this one, are in limbo.
Why it matters: If you’re assuming a clean repeal and planning your income, deductions, or charitable contributions around that outcome, you could be making costly moves based on wishful thinking.
What to do: Build multiple planning scenarios that reflect each possible outcome, including cap repeal, cap extension, or cap modification. This allows you to make more informed year-end decisions when the legislative picture becomes clearer.
Trap #2: Misjudging Economic Nexus in a Remote, Multi-State World
The 2018 South Dakota v. Wayfair ruling fundamentally changed the SALT landscape by allowing states to tax businesses based on economic presence, not just physical presence. That change continues to evolve, especially now, with so many businesses employing remote teams and selling nationally.
In 2025, most states have adopted their own economic nexus thresholds based on revenue or transaction counts. Some are even starting to tighten or clarify the rules they already put in place.
Why it matters: You could be generating taxable revenue in a state, or employing someone there, without realizing it creates filing and payment obligations. Even businesses with no office or warehouse in a state may still owe sales tax, income tax, or franchise tax.
What to do: Conduct a nexus study that examines where your revenue is coming from and where your employees are located. This should be a midyear checkup at minimum, especially if your sales model or workforce changed in Q1 or Q2.
Trap #3: Getting Pass-Through Entity Elections Wrong
Since 2018, many states have offered pass-through entity (PTE) workarounds to help owners of S corporations, partnerships, and LLCs bypass the SALT deduction cap at the individual level. These elections generally allow the entity itself to pay state income taxes and deduct them fully on the federal return.
But these regimes differ significantly from state to state. Some have deadlines early in the tax year. Others require estimated payments or special forms. And some have quirks that affect how the credit is passed through to owners.
Why it matters: Electing to pursue a PTE tax regime without fully understanding the rules can lead to overpayment, underpayment, or missed planning opportunities, especially for businesses operating in multiple states.
What to do: Reevaluate your PTE elections as part of your midyear tax planning. Make sure they’re still aligned with your ownership structure and current-year projections. For growing companies or those with outside investors, this evaluation can also uncover unexpected tax burdens for individual owners.
Trap #4: Overlooking New 2025 State-Level Taxes
A number of states and municipalities introduced new taxes in early 2025, many of them outside the typical income or sales tax categories. These include:
- Gross receipts taxes
- Digital advertising taxes
- Excise taxes on environmental impact
- Payroll or headcount-based levies
Because these taxes often fly under the radar, especially for smaller or midsize businesses, they can go unnoticed until a compliance notice or audit appears.
Why it matters: Failure to track these taxes can result in noncompliance, penalties, and late-payment interest. In some cases, it can also affect your relationships with vendors, customers, or regulatory agencies.
What to do: Designate someone on your internal team, or work with an advisor, to track state and local tax developments in every jurisdiction where you operate or sell. Even a single contract, employee, or warehouse can create new obligations.
Trap #5: Underestimating the SALT Impact of Remote Workers
Remote work has become a permanent fixture of the modern workplace. But its tax implications are anything but simple.
Having a single employee working in a new state, even temporarily, can create tax nexus, affect your payroll withholding obligations, and open the door to audits. As hybrid and remote policies evolve throughout 2025, businesses that fail to document and track where work is being done are exposing themselves to unnecessary risk.
Why it matters: If you’re not tracking where employees are working, and for how long, you could already be noncompliant with state tax or labor laws. And unlike in prior years, states are actively enforcing these rules.
What to do: Implement a system to monitor employee locations, work patterns, and time spent in each state. Establish clear remote work policies and regularly review them to align with tax implications.
How to Stay Ahead in the Second Half of 2025
While the SALT landscape is undeniably complex, the steps to reduce your risk are straightforward:
- Run a SALT Health Check: Midyear is the perfect time to assess nexus exposure, review PTE elections, and map out scenarios for the SALT deduction cap.
- Leverage Technology: Use tax automation tools to monitor thresholds, manage filings, and stay current with rate and rule changes.
- Prioritize Documentation: Create detailed records of revenue sources, employee work locations, and tax filings. These can be invaluable during audits or disputes.
- Partner with Experts: A SALT specialist can help you interpret the latest legislative movements, tailor strategies to your business model, and minimize compliance costs.
How Tanner Can Help
Tanner’s SALT team works with growing businesses, founders, and CFOs to demystify multi-state tax obligations and turn complexity into clarity. We help clients:
- Build SALT planning strategies that adapt to uncertain legislation
- Assess and manage economic nexus
- Evaluate the ROI of PTE elections
- Monitor new taxes across all 50 states
- Navigate audits and resolve state-level tax disputes
As we move into the second half of 2025, the opportunities for proactive planning are real. Let’s make sure SALT doesn’t become a surprise. It becomes a strength.