Year-End Tax Planning Tips for DMV Residents: Make the most of the New SALT deduction cap.

As 2025 winds down, now is the time for DMV residents – especially those balancing higher property and income taxes – to focus on taking advantage of new tax rules that can make a real difference on your tax return for this year. The most significant update this year is the increase in the State and Local Tax (SALT) deduction cap, which will benefit thousands of taxpayers across D.C., Maryland, and Northern Virginia.

This week we look at making the most of these changes—and some other smart moves to consider taking before December 31. Remember, always talk with a professional when seeking tax and financial advice.

The SALT deduction allows taxpayers who itemize to deduct certain state and local taxes—like income, property, and sales taxes—from their federal taxable income.

In recent years, this deduction was capped at $10,000, which hit DMV homeowners particularly hard given our region’s higher property values and state income tax rates. However, this year congress voted to increase the cap to $40,000 for joint filers (and $20,000 if married filing separately).

The higher cap gives DMV taxpayers who itemize the chance to significantly reduce their federal taxable income:

• Homeowners in Maryland and Virginia: Property taxes are typically due semi-annually; consider prepaying your 2026 installment before December 31 if you expect to itemize for this year’s return – but first with confirm with a tax expert that it’s allowed in your locality. For Virginia residents, prepaying your car property tax can also count toward reaching the new deduction limit.
• Commuters with dual-state tax obligations: Many DMV residents work in one jurisdiction and live in another (e.g., Virginia residents working in D.C.). Review state tax credits and reciprocity agreements to ensure you’re not overpaying state taxes—and to maximize your eligible SALT deductions.
• Small-business owners: Ask your CPA about the Pass-Through Entity Tax (PTET) election now available in Maryland, Virginia, and D.C., which lets your business pay state taxes at the entity level—bypassing the individual SALT cap entirely.

If you’re planning to itemize in 2025 to take full advantage of the higher SALT limit, consider other deductions that can help push your total above the standard deduction threshold:

• Charitable giving: Local charities in the DMV, such as food banks and housing nonprofits, always welcome year-end donations. Contributions of cash or appreciated stock made before December 31 can boost your deductions.
• Mortgage interest: Many homeowners in our region carry substantial mortgages. Deductible mortgage interest still provides valuable tax savings when itemizing.
• Energy-efficient upgrades: If you’ve already installed solar panels or EV charging equipment at your home this year, you may qualify for federal clean energy credits under the Inflation Reduction Act—another incentive to review before filing.

If your investment portfolio took some hits this year, tax-loss harvesting can reduce your taxable income. By selling investments that have lost value, you can offset capital gains and even deduct up to $3,000 of additional losses against ordinary income.

Just remember:

• Avoid violating the wash-sale rule, which disallows losses if you repurchase the same (or substantially identical) investment within 30 days.
• Review taxable brokerage accounts separately from your retirement accounts—since gains and losses inside IRAs and 401(k)s don’t affect your current-year taxes.
• Work with your financial advisor to identify opportunities that won’t derail your long-term investment strategy.

Saving for retirement and healthcare costs is still one of the most effective ways to lower your taxable income and build long-term stability.

• IRA contributions: For 2025, you can contribute up to $7,000 ($8,000 if age 50 or older) to a traditional or Roth IRA. Contributions are allowed until April 15, 2026, but contributing before year-end can maximize compounding.
• HSA contributions: If you’re enrolled in a high-deductible health plan, don’t forget to fund your Health Savings Account. For 2025, limits are $4,300 for individuals and $8,550 for families, plus a $1,000 catch-up if you’re 55 or older. HSAs are especially powerful for DMV families facing rising healthcare costs—they provide a triple tax benefit (tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified expenses).

A little organization now can make your spring much less stressful.

• Collect and review all your W-2s, 1099s, mortgage statements, and property tax receipts.
• Verify that your withholding is on track to avoid a surprise tax bill.
• Schedule a consultation with your credit union financial advisor or tax professional to review your 2025 financial picture before the year ends.