Maximize Your SALT Deductions with Non-Grantor Trusts: A Tax-Saving Strategy

Ever wonder how you can unlock significant tax savings and enhance your estate planning? Non-Grantor trusts could be your answer, especially with the changes brought by the One Big Beautiful Bill Act. This Act has significantly raised the state and local tax (SALT) deduction cap, providing a golden opportunity for savvy taxpayers. The SALT deduction cap has been increased from $10,000 to $40,000 in 2025, and it will continue to rise by 1% annually. Now, imagine transferring your income-producing assets into multiple non-grantor trusts. Guess what? You can multiply your SALT deductions, reduce federal tax liability, and foster better estate planning outcomes. But there’s a catch. This increased cap is only available for taxpayers with an adjusted gross income (AGI) of $500,000 or less. Anything more, and the cap gradually reduces by 30%, but not below $10,000. Now, let’s talk about non-grantor trusts – these are separate taxable entities, filing their own tax returns. They can claim their own SALT deduction, up to the enhanced cap, provided the trust’s AGI doesn’t exceed $500,000. This means you could effectively offset state and local taxes on multiple income streams by setting up separate trusts for each. So, where does this leave you? If you’re residing in high-tax states, this could be a game-changing strategy. It’s time to consider whether non-grantor trusts could help maximize your SALT deductions and optimize your estate planning.

Source: www.kiplinger.com