What Is the SALT Deduction?
The SALT deduction—short for State and Local Tax deduction— is a federal income tax provision that allows taxpayers who itemize their deductions to subtract eligible state and local taxes from their federally taxable income. This helps prevent taxpayers from being taxed twice on the same income by letting them deduct certain taxes already paid to state and local governments when calculating their federal tax liability. Eligible taxes include:
- State and local income taxes (or, alternatively, state and local sales taxes, but not both in the same year)
- Property taxes on real estate
- Personal property taxes (such as on vehicles or boats)
To claim the SALT deduction, a taxpayer must itemize their deductions instead of taking the standard deduction.
The $10,000 Cap: Past Law
The Tax Cuts and Jobs Act (TCJA) of 2017 capped the SALT deduction at $10,000 for both single filers and joint filers ($5,000 if married filing separately).
The OBBBA: Temporary Increase for All Filers
Under the One Big Beautiful Bill Act (OBBBA), the SALT deduction cap is temporarily raised:
- 2025: Cap increases to $40,000 for joint and single filers ($20,000 for married filing separately).
- 2026: Cap rises to $40,400 for joint and single filers and will increase by 1% annually through 2029.
- 2030 and beyond: Cap returns to the previous $10,000 limit.
Phaseouts for Higher Incomes
The OBBBA introduces an income-based phaseout regardless of filing status:
- For 2025, the higher SALT cap is reduced by 30% of the amount by which a taxpayer’s modified adjusted gross income (MAGI) exceeds $500,000 for joint and single filers ($250,000 for those married filing separately).
- At $600,000 MAGI, the cap is fully phased down to the minimum allowable $10,000–the deduction cannot go below this floor.
This phaseout threshold increases by 1% yearly through 2029.
Summary Table
|
Filing Status
|
2025 SALT Deduction Cap
|
Phaseout Threshold (MAGI)
|
Phaseout Rate
|
Minimum Deduction
|
|
Single
|
$40,000
|
$500,000
|
30%
|
$10,000
|
|
Married Filing Jointly
|
$40,000
|
$500,000
|
30%
|
$10,000
|
|
Married Filing Separate
|
$20,000
|
$250,000
|
30%
|
$5,000
|
Who Benefits from the Increased Cap?
- The increased SALT deduction offers temporary relief for some taxpayers, particularly those with incomes below the phaseout thresholds who live in high-tax states or pay high property taxes.
- Most average households—regardless of filing single or jointly—do not pay more than $10,000 in total state and local taxes. Thus, the previous cap and the temporary OBBBA cap are functionally identical for them.
Taxpayers should review their state and local taxes and consider whether the raised cap and phaseout influence the decision to itemize or take the standard deduction. If you’re unsure how these rules apply to your personal situation or want help creating a tax-efficient plan, please reach out to our team at Provista Wealth Advisors. We’re here to help you develop a strategy tailored to your goals.