A Whale of a Change!

In the charming village of Corolla, tourists today can explore the Whalehead Club, a fascinating bit of real estate in the northern Outer Banks.  The 21,000 square foot Art Nouveau estate, completed in 1925, was owned by Edward and Marie-Louise Knight.  Edward’s father invented a railroad sleeping car and sold the patent to the Pullman Company, locking in the family fortune.  Marie-Louise also came from a wealthy family, so the couple spared no expense in building the home, spending the equivalent of almost $7 million dollars at current value. 

The Whalehead Club served as a summer home for the Knights and a hunting lodge for their guests who participated in waterfowl hunting.  Upon their deaths in 1936, the property went through a series of uses until it was ultimately abandoned.  Currituck County bought the property in the 1990s and restored it to its original grandeur. It is listed on the National Register of Historic Places and is operated today as a tourist attraction.

Just imagine what the taxes would be on this magnificent property if it was in private hands!  However, since 2018, private owners probably wouldn’t have been able to deduct the property taxes on their tax return.  This is because property taxes, along with expenses like qualifying medical expenses, mortgage interest, and charitable contributions, are deductible only if the taxpayer chooses to itemize instead of taking the standard deduction.  And in 2018, the standard deduction for all filing statuses went up dramatically, leaving less than 10% of taxpayers benefiting from itemizing. 

A contributing factor to the demise of itemizing was the SALT Limit.  SALT stands for State and Local Taxes and includes not only real estate taxes but also personal property taxes on things like vehicles and boats, and state and local income taxes.  Since 2018, the SALT limit has been $10,000 per return, whether the taxpayer was single or married and filing jointly.

OBBBA changed this limit to $40,000 per return for tax years 2025 -2029.  This $40,000 limit is still per return, so a single filer gets the same limit as a couple filing jointly.  Married taxpayers filing separately get a new $20,000 SALT limit.  The cap starts to be phased out when Modified Adjusted Gross Income exceeds $500,000. 

This new law will mostly benefit higher earners who are paying significant state income taxes in addition to property taxes.  With a higher cap on taxes paid, some taxpayers who have been taking the standard deduction will now benefit from itemizing, especially if they have substantial mortgage interest and/or charitable contributions that can be deducted. 

We suggest clients bring in documentation of all taxes paid, along with mortgage interest statements and documentation of charitable giving.  (Medical expenses remain deductible only after they exceed 7.5% of Adjusted Gross Income, keeping this threshold too high for most taxpayers.)  With the necessary information at hand, we will make sure each taxpayer makes the right choice between taking the standard deduction or itemizing. You don’t have to own a property rivaling the Whalehead Club to benefit from the huge increase in the SALT cap, so let’s make sure we have all the information we need to claim all qualifying deductions.

Front view of the Whalehead Club in Corolla