H&R Block Advises on $40,000 SALT Cap Increase and 90% Gambling Loss Limit
H&R Block outlines a $40,000 SALT deduction cap for tax year 2025, up from $10,000, covering property and state taxes for itemizers. It also clarifies that student loan interest is deductible within income limits, gambling loss offsets will be capped at 90% next year, and reinvested dividends boost cost basis.
1. SALT Deduction Cap Increase
Clients can now deduct up to $40,000 in combined state and local taxes for the 2025 tax year, up from the prior $10,000 cap. This applies only if they itemize deductions and covers either state income or sales taxes plus property taxes.
2. Student Loan Interest Deduction
Only the interest portion of student loan payments is deductible, subject to phase-out based on income thresholds. Principal payments are not eligible, limiting the deduction's total value for many filers.
3. Gambling Loss Offset Changes
For the 2025 tax year, taxpayers can offset gambling wins dollar for dollar with losses. Starting in 2026, losses will only be deductible up to 90% of winnings, potentially creating taxable gains even when net activity is flat.
4. Reinvested Dividends Treatment
Dividends that are reinvested are not deductible but are added to the investment's cost basis. This increases the basis for capital gains calculations and can reduce taxable gains on disposition.