Impact of SALT Cap Changes on High-Income H-1B Visa Holders’ Tax Brackets

Key Takeaways

• OBBB Act raises SALT deduction cap from $10,000 to $40,000 in 2025 with phaseout for incomes above $500,000.
• High-income H-1B visa holders face reduced SALT deductions and higher taxes due to phaseout starting in 2025.
• Pass-through entity tax deductions remain uncertain with House and Senate versions differing on PTET limits.

As of July 6, 2025, the United States 🇺🇸 tax landscape is shifting for many immigrants, especially high-income H-1B visa holders. The One Big Beautiful Bill Act (OBBB) has brought major changes to the State and Local Tax (SALT) deduction cap and related tax rules. These changes are expected to have a direct impact on the finances of H-1B professionals, particularly those earning high salaries in fields like technology, finance, and consulting. Here’s a detailed look at what’s changing, why it matters, and what high-income H-1B visa holders should do next.

Who is affected?
High-income H-1B visa holders—those who often earn more than $500,000 a year—are at the center of these changes. Many work in high-paying jobs in cities with high state and local taxes, such as New York, California, and New Jersey. The new rules could mean higher tax bills for these workers, especially if their household income pushes them above the new deduction limits.

What’s changing?
The OBBB Act temporarily raises the SALT deduction cap from $10,000 to $40,000 for 2025, with small increases each year until 2029. However, for those with a modified adjusted gross income (MAGI) above $500,000, the deduction is phased out, reducing the benefit of the higher cap. Starting in 2030, the cap drops back to $10,000. These changes are layered on top of other tax and immigration fee increases, making it more important than ever for high-income immigrants to understand their tax situation.

The New SALT Deduction Cap: What’s Different Under the OBBB Act?

Temporary Relief, But Not for Everyone

• 2025: The SALT deduction cap jumps from $10,000 to $40,000.
• 2026: The cap rises slightly to $40,400.
• 2027-2029: The cap and the income threshold for phaseout both increase by 1% each year.
• 2030: The cap returns to $10,000.

Phaseout for High Earners

• The SALT deduction starts to phase out for those with a MAGI above $500,000 in 2025.
• The phaseout threshold increases by 1% each year.
• The deduction is reduced by 30% of the amount by which MAGI exceeds the threshold.
• The deduction can never fall below $10,000, no matter how high the income.

Example:
A married couple with a MAGI of $600,000 in 2025 would see their SALT deduction reduced by 30% of the $100,000 over the $500,000 threshold. This means a $30,000 reduction in the deduction, leaving them with only $10,000 to deduct—the same as before the OBBB Act.

Why does this matter?
For high-income H-1B visa holders, the phaseout means that the temporary relief from the higher cap is mostly out of reach. Their taxable income will be higher, and they may move into a higher marginal tax bracket as a result.

How the Phaseout Impacts High-Income H-1B Visa Holders

Who are high-income H-1B visa holders?
These are professionals, often in tech, finance, or consulting, who earn salaries that can easily exceed $500,000, especially when household income is considered. Many live in states with high taxes, where the SALT deduction is a key part of their tax planning.

What happens under the OBBB Act?

• Reduced Deductions: As income rises above $500,000, the SALT deduction shrinks, increasing taxable income.
• Higher Marginal Tax Rates: Losing the deduction can push taxpayers into a higher tax bracket, meaning they pay a higher percentage on their next dollar of income.
• Limited Relief: While the cap is higher for a few years, the phaseout means that most high-income H-1B holders won’t see much benefit.

Practical Example:
Let’s say an H-1B visa holder and their spouse earn $550,000 in 2025. Their SALT deduction would be reduced by 30% of $50,000 ($15,000), so instead of the full $40,000, they could only deduct $25,000. If their income was $600,000, the deduction would drop to the minimum $10,000.

Why is this important?
Many H-1B visa holders plan their finances carefully, especially since their visa status often depends on continued employment and meeting certain income requirements. Higher taxes can affect their ability to save, invest, or even qualify for mortgages.

Pass-Through Entities and SALT Deduction Workarounds

What are pass-through entities?
These are business structures like partnerships or LLCs where income “passes through” to the owners, who report it on their personal tax returns. Many high-income professionals, including H-1B visa holders, receive income this way.

SALT Deduction Workarounds

• Some states allow pass-through entities to pay state taxes at the entity level, letting owners bypass the SALT cap.
• The House version of the OBBB Act tries to limit these workarounds, especially for service and investment partnerships.
• The Senate version does not limit the deduction for pass-through entity taxes (PTET), so the workaround remains for now.

What does this mean for H-1B visa holders?

• If you’re a partner in a law firm, consulting group, or investment partnership, you may still be able to deduct more state taxes through the PTET workaround—unless the final bill changes this.
• The final outcome depends on how the House and Senate versions are reconciled in the coming months.

Key Point:
If you receive income from a partnership or LLC, pay close attention to updates on the OBBB Act. The rules could change, affecting your tax planning for 2026 and beyond.

Broader Tax and Immigration Context

Fee Increases and Immigration Changes

• The OBBB Act also raises some immigration-related fees, which could add to the financial burden for H-1B visa holders.
• These changes are separate from the SALT deduction issue but are part of a larger trend of increasing costs for immigrants.

Connection to the 2017 Tax Cuts and Jobs Act (TCJA)

• The OBBB Act modifies several parts of the TCJA, aiming to give some relief to taxpayers while closing loopholes.
• The SALT cap was first introduced by the TCJA, and the OBBB Act is the first major change to it since then.

Why does this matter for immigrants?
Immigrants on H-1B visas often have less flexibility in their finances due to visa requirements, family sponsorships, and the need to maintain legal status. Higher taxes and fees can make it harder to meet these obligations.

Expert Opinions and Stakeholder Reactions

Tax Professionals’ Views

• Many CPAs and tax advisors welcome the higher SALT cap, but warn that the phaseout means high-income earners won’t benefit much.
• The phaseout creates a “cliff effect”—just a small increase in income above $500,000 can lead to a big loss in deductions.

Advocacy Groups’ Concerns

• Groups representing high-income professionals and immigrant communities are watching the bill closely.
• They worry that the combination of higher taxes and increased immigration fees could make the United States 🇺🇸 less attractive for top global talent.

Uncertainty Remains

• The House and Senate versions of the bill differ, especially on the PTET workaround.
• Final rules will depend on how lawmakers resolve these differences in the coming months.

As reported by VisaVerge.com, the uncertainty around the final version of the OBBB Act is causing concern among high-income H-1B visa holders, who may need to adjust their tax planning strategies quickly once the law is finalized.

What Should High-Income H-1B Visa Holders Do Now?

1. Review Your Income and Deductions

• If your MAGI is close to or above $500,000, expect your SALT deduction to shrink.
• Calculate how much state and local tax you pay, and see how much you’ll be able to deduct under the new rules.

2. Pay Attention to Pass-Through Entity Rules

• If you receive income from a partnership or LLC, watch for updates on the PTET deduction.
• The rules could change, affecting your 2026 tax return and beyond.

3. Adjust Your Tax Planning

• Consider timing income or deductions to maximize your benefit before the phaseout hits.
• Talk to a tax professional who understands both high-income and immigrant tax issues.

4. Prepare for Higher Immigration Fees

• The OBBB Act includes higher fees for some immigration services.
• Factor these costs into your financial planning, especially if you’re planning to renew your visa or apply for a green card.

5. Stay Informed

• Follow updates from official sources, such as the U.S. Citizenship and Immigration Services (USCIS), for the latest on immigration fees and forms.
• Check the Senate Budget Committee and House Ways and Means Committee websites for updates on the OBBB Act.

Summary Table: SALT Cap and Phaseout Under OBBB Act

Real-World Scenarios: How the OBBB Act Affects H-1B Families

Scenario 1: Tech Couple in California

• Both spouses are H-1B visa holders, earning a combined $520,000.
• They pay $35,000 in state and local taxes.
• Under the OBBB Act, their deduction is reduced by 30% of $20,000 ($6,000), so they can deduct $29,000 instead of the full $35,000.
• Their taxable income rises, and they may pay several thousand dollars more in federal taxes.

Scenario 2: Investment Manager with Partnership Income

• An H-1B visa holder receives $600,000 in partnership income.
• If the PTET workaround remains, they may still deduct most of their state taxes.
• If the House version passes, their deduction could be limited, raising their tax bill.

Scenario 3: Single H-1B Holder in New York

• Earns $480,000, just below the phaseout threshold.
• Can deduct the full $40,000 in 2025, but a small raise could push them over the limit, reducing their deduction sharply.

Looking Ahead: What’s Next for High-Income H-1B Visa Holders?

Watch for Final Legislation

• The House and Senate must agree on a final version of the OBBB Act.
• The biggest area of uncertainty is the treatment of pass-through entity taxes.

Plan for 2030 and Beyond

• The higher SALT cap is only temporary. In 2030, the cap drops back to $10,000 for everyone.
• Long-term tax planning should take this into account.

Consider Immigration Status

• Higher taxes and fees could affect decisions about staying in the United States 🇺🇸, applying for permanent residency, or moving to lower-tax states.

Where to Find Official Information

• For the latest on immigration forms and fees, visit the U.S. Citizenship and Immigration Services (USCIS) website.
• For updates on the OBBB Act, check the Senate Budget Committee and House Ways and Means Committee sites.
• Tax professionals and organizations like the American Institute of CPAs (AICPA) provide ongoing analysis.

Final Takeaways

The One Big Beautiful Bill Act brings both relief and new challenges for high-income H-1B visa holders. While the temporary increase in the SALT deduction cap offers some help, the phaseout for those earning above $500,000 means many will see higher tax bills. The rules for pass-through entity taxes remain uncertain, and higher immigration fees add to the financial pressure. Careful tax planning and staying informed about legislative changes are essential for H-1B visa holders to manage these new realities.

If you’re unsure how these changes affect you, consult a tax professional with experience in both high-income and immigrant tax issues. Staying proactive will help you make the best decisions for your financial future in the United States 🇺🇸.

Learn Today

OBBB Act → The One Big Beautiful Bill Act, a 2025 law changing SALT deduction limits and immigration fees.
SALT Deduction → State and Local Tax deduction limits on federal income tax returns.
MAGI → Modified Adjusted Gross Income, income used to determine SALT deduction phaseout eligibility.
Pass-Through Entity → A business structure where income passes to owners’ personal tax returns, affecting tax deductions.
Phaseout → A gradual reduction in tax benefits as income surpasses a specified threshold.

This Article in a Nutshell

The OBBB Act temporarily increases the SALT deduction cap, but high-income H-1B visa holders face phased deduction limits and higher taxes. Pass-through entity deductions add complexity. Staying informed and consulting tax experts is critical for managing 2025 tax changes affecting immigrants earning over $500,000 in the U.S.
— By VisaVerge.com