SALT stands for State And Local Taxes. It’s basically state and local income taxes and property tax. The 2017 Trump tax law capped the tax deduction for SALT at $10,000. If you paid more than $10,000 in state and local taxes, the amount above the $10,000 cap wasn’t deductible.
The SALT cap primarily affected high earners in high-tax states. Legislators from those states had been demanding that the SALT cap be raised or repealed. The 2025 Trump tax law — One Big Beautiful Bill Act — finally raised the SALT cap for the next few years.
Temporary SALT Cap Increase
The SALT cap goes from $10,000 to $40,000 in 2025 (one-half for married filing separately). The cap will further increase by 1% a year until 2029. Then it returns to $10,000 in 2030.
| Year | SALT Cap |
|---|---|
| 2025 | $40,000 |
| 2026 | $40,400 |
| 2027 | $40,804 |
| 2028 | $41,212 |
| 2029 | $41,624 |
| 2030 | $10,000 |
I pay more than $10,000 in state income tax and property tax. With the SALT cap increase, my SALT deduction will be uncapped because it’s less than $40,000. Does this mean my total deductions will increase now?
Stay In Standard Deduction
Nearly 90% of taxpayers take the standard deduction. That percentage will drop a little bit after the SALT cap increase, but it’s expected that over 80% of taxpayers will still take the standard deduction.
I’m in this camp. I took the standard deduction when the SALT cap was $10,000. I will continue to take the standard deduction even though I pay more than the old cap in state and local taxes. This is because when I add my other itemizable deductions (mortgage interest, charity donations, …) to the total state and local taxes I pay, it’s still lower than the standard deduction.
You will get no increase in your deductions from the SALT cap increase if you took the standard deduction under the old cap, and you’ll still take the standard deduction under the new cap (except for the increase in the standard deduction itself, unrelated to the SALT cap).
Switch to Itemizing
You will get a partial increase if you took the standard deduction before, and you will switch to itemizing after the SALT cap increase.
You get a partial increase because you must pass the hurdle of the standard deduction first. Taking the standard deduction gives you an allowance of free deductions. It’s free because everyone gets the standard deduction; you don’t have to do anything to get it. Switching from the standard deduction to itemized deductions means now you must pay for the allowance that used to be free with a part of your itemized deductions. Your deductions will increase only by what remains after you pay for the free allowance.
For example, suppose you have $5,000 in non-SALT itemizable deductions. You have $15,000 in total itemizable deductions under the old SALT cap, and the standard deduction is $31,500 for married filing jointly. You grab the $16,500 free allowance when you take the standard deduction. Suppose now your total itemized deductions under the new SALT cap are $45,000. Your SALT cap increases by $45,000 – $15,000 = $30,000, but your total deductions only increase by $45,000 – $31,500 = $13,500. You must use $16,500 from your $30,000 increase to pay for the allowance that used to be free.
Continue Itemizing
You will get the full increase if you were already itemizing deductions, and you’ll continue to do so. An increase in the SALT cap increases your SALT deduction to the amount you paid in state and local taxes, up to the new cap. This increase adds to your itemized deductions dollar for dollar.
Income-Based Phaseout
However, the new cap isn’t $40,000 for some high earners, because it has an income-based phaseout. The SALT cap drops by 30% of the Modified Adjusted Gross Income (MAGI) above $500,000. When the MAGI reaches $600,000, the SALT cap is back to the old $10,000.
The MAGI for the phaseout is the AGI for most people. It doesn’t add back untaxed Social Security or tax-free muni bond interest. The “modified” part is only for foreign earned income exclusion and residents in Puerto Rico, Guam, American Samoa, and the Northern Mariana Islands.
The table below shows how the SALT cap is phased out with income. Interpolate for an income between two rows in this table.
| 2025 MAGI | SALT Cap |
|---|---|
| $500,000 or less | $40,000 |
| $510,000 | $37,000 |
| $520,000 | $34,000 |
| $530,000 | $31,000 |
| $540,000 | $28,000 |
| $550,000 | $25,000 |
| $560,000 | $22,000 |
| $570,000 | $19,000 |
| $580,000 | $16,000 |
| $590,000 | $13,000 |
| $600,000 or more | $10,000 |
The starting point for the phaseout also increases by 1% a year through 2029. There’s no phaseout in 2030 when the SALT cap goes back to $10,000.
| Year | Phaseout Starts At |
|---|---|
| 2025 | $500,000 |
| 2026 | $505,000 |
| 2027 | $510,050 |
| 2028 | $515,151 |
| 2029 | $520,302 |
| 2030 | No phaseout |
Marriage Penalty
The $500,000 income threshold for the phaseout is the same for both single and married filing jointly. It carries a huge marriage penalty. Two single persons, each earning $400,000, can deduct up to $80,000 between the two of them. A married couple earning $800,000 is phased out to a $10,000 cap. Married filing separately doesn’t help because both the phaseout threshold and the cap are cut in half.
Higher Marginal Tax Rate
The SALT cap phaseout also increases the marginal tax rate in the phaseout income range. The tax bracket in that income range is normally 32% or 35%. Because a $10,000 increase in the phaseout income range also reduces the SALT cap by $3,000, the marginal tax rate becomes 32% * 1.3 = 41.6% or 35% * 1.3 = 45.5% when the SALT paid is limited by the cap.
High-earners in the phaseout income range should do all-out pre-tax contributions to lower their AGI.
Calculator
I created a calculator to show whether you’ll see no increase, a partial increase, or a full increase from the new SALT cap. The calculator takes into account both the standard deduction and the SALT cap phaseout at higher incomes. It calculates the federal income tax before and after the SALT cap increase to show the tax savings.
[Email readers: The calculator doesn’t work in emails. Please go to the website to use the calculator.]
The calculated tax does not include the Net Investment Income Tax (NIIT). Nor does it consider Alternative Minimum Tax (AMT).
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Most people will see no benefit from the SALT cap increase because they will continue to take the standard deduction. Some will see a partial increase in their deductions when they start itemizing. Only people who were already itemizing deductions before will see the full increase, unless they get phased out.
You’ll find more deep dives on recent changes from the 2025 Trump tax law in the full OBBBA series.
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Coriander says
You’re probably right that the SALT increase won’t make a difference for most married taxpayers. But my guess is it will push a lot of single taxpayers into itemizing, particularly those in states with an income tax. It doesn’t take much more SALT to exceed the standard deduction for a single filer.
Harry Sit says
That’s true. Single taxpayers have a higher likelihood to be already itemizing before the SALT cap increase, especially if they own their homes with a mortgage. 3% interest on a $400k balance is $12k in mortgage interest. They would’ve itemized with some state income tax and property tax. To the extent their SALT was capped to $10k before, they would see a full increase when it’s uncapped, up to $40k.
Harry Sit says
Sorry, posted to the wrong place.
John Kircher says
I am totally against SALT. SALT encourages states to raise their tax to the SALT limit. SALT allows states to raise their tax up to the limit set for SALT and have the rest of us in no income tax states pay federal tax to make up for it. If there was no SALT, these states would be forced to manage their state better, as they should.
Harry Sit says
I think it’s the other way around. People in high-tax states have higher incomes to afford the higher state taxes. They pay higher federal income tax to subsidize people in no-tax states as a result. But that’s a debate for another day.
Steve says
“Don’t tax you.
Don’t tax me.
Tax the fellow behind that tree.”
Marc says
State governments are not consulting the SALT IRS rules to determine their taxation level. They tax in order to provide public services in high cost of living areas. The SALT deduction existed since the inception of the income tax (without any cap) to prevent individuals from being taxed twice on the same thing. The argument that low tax states are subsidizing SALT is erroneous. It’s the high tax states that pay more taxes to the federal government which they do not get back in full from the federal government in aid and services. The difference is what subsidizes lower tax states that get more federal funding back than they pay into the system. There are plenty of middle class / upper middle class earners who benefit from SALT. This is because home prices have appreciated so much over the years that their home assessments and property taxes have skyrocketed. It’s not just the wealthy and ultra wealthy that are impacted.
Steve says
You wrote: “The SALT cap primarily affected high earners in high-tax states.”
Yep.
Thanks for the good article.
Steven W says
The SALT deduction is a benefit to the ultra wealthy, it doesn’t phases out until MAGI is more than $590,000. Contrast the misnomer “No Tax on Social Security” which has No deduction or benefit for MAGI more than $250,000. Which just by coincidence is where NIIT’s 3.8% tax kicks in. The bullseye hasn’t changed for the taxpayer near $250,000 (Married Joint Return).
Marc says
I fall into the partial camp. The SALT on my primary residence is high but still falls under the new cap. The SALT on my vacation apartment in another state takes it above the new cap. Is it still the case that the latter gets combined with the former to determine the total SALT, or did that change in the new law?
Harry Sit says
How the SALT get combined didn’t change.
Jane says
We are relatively low-income taxpayers who will be able to take advantage of the increased SALT deduction. Our property taxes total $23k/annum, we will ‘bunch’ into every other tax year to itemize and then take the standard deduction in the off year. I am patting myself on the back as I have been paying our property taxes ‘late’ i.e. I paid 2024 taxes in January 2025, the last month to pay them without an interest penalty. I will pay this year’s in December, and then itemize for 2025. The increased SALT deduction is for years 2025 – 29 inclusive, so by taking advantage of it this year, we will get three years of itemizing and not two. Small wins…
Dan K says
After the election outcome last November, I made some tax planning decisions that seem to have worked out. I paid enough state income taxes to be in the safe-harbor range for 2024 state taxes and then paid the rest with my state tax return filing in 2025. I effectively moved $15K state income taxes from not being federally deductible in 2024 to being fully deductible in 2025.
You might wonder why I had such a large $15K state tax liability. I created a huge federal and state tax liability for myself in 2024 to get federal tax revenue paid during the previous administration for the opportunity to deny the current administration an amount of income tax revenue somewhere in the high 5 to low 6 figure range over several years. I did Roth conversions for some ordinary income tax liability and then long term capital gain harvesting to get to the top of the 15% capital gain tax bracket ($583,750 MFJ in 2024). I will have several years of paying close to $0 federal income tax by staying within the 0% long term capital gains bracket. Since the top of the 0% long term capital gains tax bracket is close to $100K, that is about $15K not paid in federal taxes each year that would have otherwise been taxed at 15%. The cost was is about $4K for the extra 2% paid from the top of the 22% tax bracket to the top of the 24% tax bracket (about $200K) plus about $5K in ACA investment income taxes at 3.8% plus thousands of dollars of as of yet unknown IRMAA medicare premiums to be paid in 2026. The cost is more than made up by the second year.