Colorado Taxpayers Face New SALT Cap and Senior Deductions for 2025

The wind off the Roaring Fork cuts through the wool of a parka, sharp and cold, while inside the Delta County courthouse, the heating system rattles with the same tired rhythm it’s maintained for decades. It’s the kind of Tuesday that makes you grateful for indoor plumbing and, more importantly, for a tax professional who knows the difference between a deduction and a credit.

Tax season is arriving, and if you’re listening to local financial columnist Littlejohn, it’s coming with a distinct holiday vibe. He’s drawing a parallel between the jolly man in the red suit and the IRS, suggesting that this year’s filing could bring either coal or presents. But don’t get too excited about that big refund check sitting in your mailbox. Littlejohn argues that a large refund isn’t really a gift from the government; it’s a no-interest loan you gave them all year long because you miscalculated your withholdings. You’re getting your own money back, just later than you might have liked.

The real story here isn’t the refund size. It’s the changes in the law that determine how much you keep. Littlejohn points to the "naughty and nice" nature of tax updates, noting that some provisions are temporary gifts while others are expiring tax hikes. The most significant shift for locals? The State and Local Tax (SALT) deduction cap. It has jumped from $10,000 to $40,000 for the 2025 tax year.

This matters specifically for Coloradans. According to the Bipartisan Policy Center, Colorado has one of the highest percentages of taxpayers claiming the SALT deduction in the country — 11.2% of us. That increase to $40,000 means many of our neighbors, particularly those in higher-income brackets, will owe less in state and local taxes. However, there’s a catch. The benefit phases out for taxpayers with incomes over $500,000, so if you’re selling a cabin in Snowmass or cashing in a big timber contract, you might not see the full benefit.

Then there’s the "One Big Beautiful Bill" tax act, passed last summer, which Littlejohn notes was recently dubbed "Operation Build Back Better Again" by those who saw it coming. This legislation introduces several new deductions that could lower your taxable income, but they come with strict age and income limits.

Seniors are getting a boost. If you’re 65 or older, you can now deduct up to $6,000 for tax years 2025 through 2028. This stacks on top of the existing standard deduction for seniors, which is already $2,000 higher than the normal standard deduction. But if your modified adjusted gross income (MAGI) exceeds $75,000, or $150,000 for joint filers, that deduction starts to shrink. It’s a targeted gift, not a blanket one.

For the working class, specifically those who rely on tips and overtime, there’s new relief. Employees and the self-employed can claim a deduction of up to $12,500 on tips and overtime pay. Married couples filing jointly can deduct up to $25,000. This applies whether you itemize or take the standard deduction, and it phases out for individuals earning over $150,000. If you’re a server at a high-end restaurant in Basalt or a contractor working double shifts in the winter, this could add up.

Littlejohn also highlights a new deduction for car loan interest. You can now deduct up to $10,000 annually on interest paid for loans on new vehicles assembled in the United States. This is designed to expire in 2028, so it’s a short-term incentive. It phases out at $100,000 in AGI for individuals. And for parents looking to invest in their kids’ futures, there are "Trump Accounts" — tax-advantaged custodial investment accounts for children under 18. Parents can contribute up to $5,000 per year, though withdrawals aren’t allowed until the child reaches a certain age.

It’s a complex landscape. The SALT cap increase helps, but the senior and tip deductions have income cliffs that could leave some folks on the outside looking in. And with most of these new provisions set to expire in 2028, the window to take advantage of them is closing. Locals need to look at their specific income brackets and filing status before assuming they qualify. The government isn’t giving anything away for free; it’s just changing the terms of the loan.