What the OBBBA’s SALT changes mean for South Carolinians

By Thomas W. Manly, CFP
Hobbs Group Advisors, LLC

The One Big Beautiful Bill Act (commonly called the OBBBA) made one of the biggest federal changes to state-and-local-tax (SALT) treatment since the 2017 Tax Cuts and Jobs Act. For many South Carolina households and business owners, the new rules change year-end tax planning, entity elections, and whether it makes sense to itemize. Below I explain the law’s key features, how it interacts with South Carolina taxes, and practical steps I’m taking with clients.

The headline numbers

• For tax years 2025–2029 the federal SALT deduction cap is increased from $10,000 to $40,000 per return (married filing separately: $20,000). The cap then reverts to $10,000 in 2030 unless Congress acts.
• The $40,000 cap is indexed upward by 1% per year through 2029.
• There is a phase-down for higher earners: the larger SALT allowance begins to be reduced for taxpayers with modified adjusted gross income (MAGI) over $500,000 (thresholds halved for separate filers), and the larger deduction phases back toward $10,000 as income rises.

These are federal rules that affect federal itemized deductions — they do not directly change what South Carolina charges in state tax, but they materially affect federal tax liabilities for SC taxpayers who pay substantial state or local taxes.

Why this matters to South Carolina residents

1. More potential federal tax savings for many itemizers. South Carolina is a state with an income tax and, for many households (especially homeowners in higher-tax counties or families with substantial real estate taxes), SALT payments will drastically exceed the old $10,000 cap. Raising the cap to $40,000 restores much more of that deduction on the federal return for those who itemize. That means a lower federal taxable income and potentially lower federal tax bills in 2025–2029.
2. Interaction with South Carolina’s tax environment. South Carolina has seen recent state rate and structural changes (including rate adjustments effective in 2025/2026) and it already enacted a pass-through entity (PTE) election as a SALT “workaround.” The federal SALT increase reduces the urgency of some PTE elections for owners who were pursuing them solely to avoid the $10,000 federal cap — but PTE elections can still be valuable depending on state rules, entity income composition, and the owners’ federal income.
3. High earners should beware of the MAGI phaseout. If a taxpayer’s MAGI is above the phaseout threshold (starting at $500,000 for 2025, with thresholds adjusted by year), the benefit of the higher cap is reduced — and for very high earners the effective cap can fall back close to the old $10,000. Plan with realistic MAGI estimates.

Practical planning steps I’d recommend as your Certified Financial Planner

1) Re-run your 2025 tax projection (federal + SC) now

With the $40,000 cap effective for 2025, run a combined federal/state projection to see whether you now benefit from itemizing in 2025 (mortgage interest + property taxes + state income tax or sales tax + charitable gifts) versus taking the standard deduction. The SALT change may flip the decision for some filers.

2) For owners of pass-through entities (S corp / partnerships / LLC): re-evaluate the PTE (entity-level tax) election

South Carolina already allows a PTE election that can provide state tax relief at the entity level. Under the OBBBA, the federal benefit of a PTE election may be smaller for many taxpayers, but it may still be beneficial for owners whose MAGI phaseout would limit the SALT gain, or for entities with owners in states that don’t conform to federal changes. Work through an owner-level pro forma that compares: (a) entity elects and pays PTE tax (entity gets deduction; owners get credit on state returns) vs (b) no election and owners claim SALT on their federal returns up to the new cap. Cite both federal SALT changes and SC PTE rules when modeling.

3) Review timing of state tax payments and deductible items

If you are on the margin between itemizing and standard deduction, timing deductible state payments (estimated state tax payments, real-estate tax prepayments where allowed, charitable contributions) between 2024 and 2025 can influence whether you capture the advantage of the higher SALT cap in 2025. Any year-end moves should be made with a careful projection; don’t accelerate or defer payments without modeling both state and federal effects.

4) Watch the MAGI thresholds and do sensitivity testing

Because the larger SALT allowance phases down by reference to MAGI, run sensitivity tests at different income levels so you can see when the benefit disappears. Small changes in MAGI (capital gains, Roth conversions, large bonus pay) can move taxpayers into/out of the phaseout.

5) Coordinate planning across household members and multiple properties

Remember the SALT cap is applied per tax return. Married couples filing jointly get the $40,000 cap; married filing separately get $20,000 each. If you and a spouse file separately for non-tax reasons, that may change math. Also consider blended families and multi-state taxpayers (e.g., SC resident with property in another state): residency and allocation rules matter.

Things to watch / uncertainties

• State conformity. Some states automatically conform to federal changes; others do not. South Carolina’s internal rules and any further legislative action could change how state income tax and itemized deductions interact with the federal changes. Track South Carolina DOR guidance and any legislative updates.
• Congressional action. The OBBBA’s $40,000 cap is temporary (2025–2029) and could be altered by future legislation. Don’t assume permanence.

Bottom line

• Run a 2025 federal + SC tax projection now — compare itemize vs standard.
• If you own a pass-through entity, model a PTE election vs no election using owner-level outcomes. Don’t assume the PTE election is automatically best just because it was before the federal cap change.
• If you’re near the MAGI phaseout, test multiple MAGI scenarios (include expected bonuses, capital gains, retirement distributions).
• Coordinate with your CPA and, if you have complex state situations, with a state tax specialist.

How the OBBBA SALT Changes Affect Individual Households in South Carolina

A CFP®’s in-depth guide for families, homeowners, and business owners in S.C.

The OBBBA’s expansion of the state-and-local-tax (SALT) deduction from $10,000 to $40,000 fundamentally reshapes tax planning for many South Carolina households — even middle-income families who previously took the standard deduction. The effects vary dramatically depending on income, homeownership, property tax levels, and whether someone owns a business.

Below is a detailed, practical look at how real household types in South Carolina will feel this change — and what to do about it.

1. Homeowners With “Typical” SC Property Taxes

Example household:

• Married couple
• $140,000 household income
• Annual property taxes: ~$3,000–$4,500
• State income tax owed: ~$4,000–$6,000
• Sales tax (if elected): variable, but usually not chosen in SC

Impact before OBBBA:

They rarely itemized because:

• Property tax + state tax typically = ~$8,000–$10,000
• Old SALT cap = $10,000
• Standard deduction was often higher unless they had a mortgage and large charitable giving.

Impact after OBBBA:

They can now deduct all of their property + state income tax, up to the new $40,000 ceiling.

For many households in this range, this reopens the door to itemizing, if they have:

• A mortgage with interest (often $6k–$12k/yr in early years)
• Charitable donations
• Medical deductions (rare, but possible)

Household-level planning guidance

• Recalculate whether you should itemize for 2025–2029.
• If mortgage-free, you may still NOT itemize unless total deductions exceed the standard deduction.
• Consider bunching charitable donations into alternating years to maximize itemizing benefit.
• If you expect a large state tax bill, time payments to fall into an itemizing year.

2. Higher-Property-Tax Households or Multiple Property Owners

Example:

• Married couple
• Income $175k–$300k
• Own a primary home + rental or second home
• Property taxes: $8k–$15k total
• State income tax: $7k–$15k

Impact:

Under the old law, this household would lose much of their deduction — anything over $10,000 was wasted.

With a $40,000 cap, these families frequently gain $10,000–$25,000 of additional federal deductions.

Planning guidance:

• Run a precise projection — this group often CLEARLY benefits from itemizing.
• Combine:
  • mortgage interest
  • full property tax
  • full SC income tax
  • charitable giving
• If you own multiple properties, keep clear records — the IRS often scrutinizes high SALT totals.
• Consider how rental property income interacts with itemized deductions (especially if you qualify as a real-estate professional).

3. High-Income Earners — Where Phaseouts Begin to Bite

Example:

• Income: $500,000+
• Property taxes: $12k–$20k
• State income tax: $20k–$40k

Impact:

These households appear to benefit most from the new $40,000 SALT deduction.
However — OBBBA includes a MAGI-based phaseout for high earners.
Once income climbs above the threshold, the SALT deduction gradually shrinks back toward the old $10,000 cap.

Household-level strategies:

• Model MAGI at several levels, because even small income changes (capital gains, RSUs vesting, bonuses, Roth conversions) can push you partially or fully out of the expanded SALT benefit.
• Use retirement contributions, HSAs, and timing of income to keep MAGI below the phaseout boundary.
• Consider harvesting losses in taxable investment accounts to manage MAGI.
• If you own a business, evaluate whether a South Carolina PTE tax election delivers more benefit than using the personal SALT deduction.

4. Self-Employed Individuals and Small Business Owners

This is where the situation becomes more nuanced.

SC’s Pass-Through Entity Tax (PTE) Election

South Carolina allows your business (LLC/partnership/S-corp) to pay state tax at the entity level, creating a federal deduction to the business rather than the individual.

Before OBBBA, the PTE election was usually a clear win because the federal $10,000 SALT cap restricted personal deductions.

Now? You must compare PTE vs personal SALT deduction under OBBBA.

Example:

• S-corp owner, net income $350k
• State income tax ~ $18k
• Property tax: $5k
• Mortgage interest: $9k
• Charitable giving: $6k

Two possible strategies:

• Take the enlarged SALT deduction personally
  • You could now deduct all property + income taxes up to $40k.

• Let the business take the deduction (PTE)
  • The entity deducts the full state tax expense, reducing pass-through income.

Household-level guidance:

• Households under the MAGI phaseout often benefit from personal SALT itemization.
• Households over the MAGI phaseout often benefit from PTE, because their expanded personal SALT deduction is reduced.
• Run a side-by-side calculation with:
  • pass-through income
  • state tax credit mechanics
  • MAGI thresholds
• For married filing jointly couples with business ownership, consider shifting income or deferring recognition to stay under phaseout levels.

5. Retirees in South Carolina

Retirees are a large share of SC residents and face a unique SALT profile.

Example:

• Married couple
• $110k income (pensions + RMDs + Social Security)
• Own home in a higher-value area (Hilton Head, Mount Pleasant, Charleston peninsula)
• Property tax: $5k–$10k
• State tax: $2k–$6k
• Usually mortgage-free

Household-level impact:

If mortgage-free, itemizing may only make sense if property + income tax + charitable giving > standard deduction.

But retirees frequently:

• Give substantially to charities
• Have high medical expenses (over 7.5% AGI)
• Pay HOA dues or second-home taxes
  This combination may push them into itemizing, which becomes much more attractive under the new $40,000 SALT cap.

Planning guidance:

• Track medical deductions carefully — many retirees underestimate how high these can get.
• Use Qualified Charitable Distributions (QCDs) if over age 70½ to reduce taxable income directly.
• Consider timing of property tax payments near year-end to maximize itemization in selected years.

6. Renters in South Carolina

Renters will see minimal impact, because they generally have:

• No property tax deductions
• Only the SC income tax component to deduct

If their only deductible SALT is SC income tax, even the expanded cap offers limited benefit unless they have:

• Large charitable deductions
• High medical deductions
• Mortgage interest from a co-owned property elsewhere
• Multiple deductible expenses that surpass the standard deduction

For many renters, the standard deduction still wins.

7. Married Filing Separately (MFS) Households

In South Carolina, MFS is sometimes used in high-medical-deduction or student-loan cases.

Under OBBBA:

• SALT cap is $20,000 per spouse (instead of $40,000 joint).
  This is far more generous than the previous $5,000 per spouse under the old cap.

Guidance:

• MFS can now make itemizing viable for couples who previously could not.
• Evaluate whether splitting deductions (mortgage interest, property tax) between spouses improves total household tax savings.

HYPER-PRACTICAL SUMMARY — “What should MY household do?”

Here is the distilled checklist I use with South Carolina clients:

1. Do I itemize now (post-OBBBA)?

Add up:

• property tax
• SC income tax
• mortgage interest
• charitable donations
• medical deductions
  If this total > the standard deduction → itemize.

2. Am I near the MAGI phaseout for the new SALT deduction?

If yes → control MAGI via retirement contributions, timing income, tax-loss harvesting.

3. Do I own a business?

Run a PTE vs personal SALT comparison.
The difference could be worth thousands per year.

4. Should I time state/local tax payments?

In years where you itemize → yes, timing matters.

5. Do I have multiple properties?

You are one of the biggest winners under OBBBA — model the full SALT deduction to capture your benefit.

Tax planning plays an essential role in overall financial management for every household. If your advisor and accountant aren’t communicating effectively, feel free to reach out to us.