OBBBA · IRC § 164 · Cap Raised $10K → $40K · TY 2025–2029 · Must Itemize
The OBBBA raised the state and local tax deduction cap from $10,000 to $40,000. Enter your SALT paid and MAGI to see your incremental deduction gain and estimated additional federal tax savings. Must itemize on Schedule A.
This SALT deduction calculator estimates your federal tax savings from the OBBBA SALT cap increase for 2025 and 2026. The One Big Beautiful Bill Act (Pub. L. 119-21) raised the state and local tax deduction cap from $10,000 (set by TCJA in 2017) to $40,000 for tax years 2025 through 2029. The increase applies to Single, Married Filing Jointly, and Head of Household filers. Married Filing Separately filers have a $20,000 cap. The new cap phases out for filers with MAGI above $500,000 and returns to $10,000 at approximately $600,000 MAGI (TY 2025). You must itemize on Schedule A to benefit.
| Item | Value | Status |
|---|---|---|
| Statutory reference | P.L. 119-21, §70120 | Confirmed |
| Governing form | Schedule A (Form 1040) — must itemize | Confirmed |
| TY 2025 cap — single/MFJ/HOH | $40,000 | Confirmed |
| TY 2025 cap — MFS | $20,000 | Confirmed |
| TY 2026 cap (and annual increase) | $40,400 (+1% per year through TY 2029) | Confirmed |
| Phase-out threshold — TY 2025 | $500,000 MAGI ($250,000 MFS) | Confirmed |
| Phase-out rate | $300 per $1,000 over threshold (30%) | Confirmed |
| Phase-out floor | $10,000 ($5,000 MFS) — cap never drops below TCJA floor | Confirmed |
| Phase-out elimination — TY 2025 | ~$600,000 MAGI | Confirmed |
| AMT treatment | Not deductible for AMT | Confirmed |
| PTET workaround | Available alongside individual cap (IRS Notice 2020-75) | Confirmed |
| OBBBA sunset | After TY 2029 — reverts to $10,000 cap | Confirmed |
| State conformity | Varies — no federal mandate | Provisional |
Under the OBBBA, the SALT cap was raised to $40,000. The incremental benefit is the difference between what you could deduct under the new $40,000 cap versus what you could deduct under the prior $10,000 cap. For a complete explanation of who qualifies, how itemizing interacts with the standard deduction, AMT rules, and the PTET workaround for pass-through entities, see our SALT Deduction Increase Guide.
Add your state and local income taxes paid (or state and local sales taxes if you elect the sales tax deduction) plus your real property taxes paid. Do not combine income taxes and sales taxes. You elect one. The sum is your total SALT paid for the year.
The deductible amount under the new $40,000 cap is the lesser of your SALT paid or the cap after any phase-out reduction. If your MAGI is below $500,000, the full $40,000 cap applies. Above $500,000 MAGI, the cap is reduced by 30% of the excess: $300 per $1,000 of MAGI above the threshold, with a floor of $10,000. The cap returns to $10,000 at $600,000 MAGI.
The prior deductible amount under the TCJA was the lesser of your SALT paid or $10,000 ($5,000 for MFS). The incremental gain is the difference between the new deductible amount and the old deductible amount. This is the additional SALT deduction the OBBBA provides.
Multiply the incremental deduction gain by your federal marginal tax rate. A filer in the 24% bracket with a $20,000 incremental deduction gain saves approximately $4,800 in additional federal income tax compared to the old $10,000 cap.
This benefit is only realized if you itemize. If your standard deduction exceeds your total itemized deductions, the SALT increase does not reduce your tax. Many filers in high-tax states were already itemizing under the $10,000 cap. Those filers benefit directly from the increase. Filers who switched to the standard deduction after TCJA 2017 may need to compare again given the higher SALT limit.
The OBBBA SALT cap increase is enacted law under §70120. Most rules are confirmed. State-level interactions remain pending in some cases.
No. The SALT deduction cap is a federal income tax rule. It has no effect on your state or local tax bill.
Your state income tax is calculated under your state's own tax code. Your property tax is set by your local government. Neither changes because Congress raised the federal SALT cap. What changed is how much of those state and local taxes you can deduct on your federal Form 1040.
A taxpayer in New Jersey who pays $25,000 in property taxes and $15,000 in state income tax still owes those amounts to their state and local government in full. The OBBBA change means they can now deduct up to $40,000 of that $40,000 total on their federal return — instead of the prior $10,000 cap. Their federal income tax may decrease. Their NJ state tax and property tax bills do not change.
The SALT cap increase only saves you federal income tax if you itemize on Schedule A and your total SALT paid exceeds the prior $10,000 cap. If you take the standard deduction, the SALT cap change provides no benefit.
Three conditions must be true for the OBBBA SALT increase to reduce your federal taxes:
Without the OBBBA increase, this couple's SALT was capped at $10,000 — and their total itemized deductions would be only $20,000, which falls below their $30,000 standard deduction. Under the prior law, they would have taken the standard deduction and received no SALT benefit at all. The OBBBA increase makes itemizing worthwhile for this household.
Three conditions must be true for a filer to benefit from the OBBBA SALT increase:
Filers most likely to benefit are in high-tax states where property taxes and state income taxes routinely exceed $10,000 combined. The states where the highest share of itemizing filers hit the old $10,000 cap include California, New York, New Jersey, Connecticut, Massachusetts, and Illinois. Filers in states with no income tax (Florida, Texas, Nevada, etc.) who have high property taxes also benefit if their property taxes alone exceed $10,000.
The OBBBA SALT cap phases out for filers with MAGI above $500,000. The new $40,000 cap is reduced as MAGI rises, returning to the old $10,000 TCJA floor. The deduction never drops below $10,000 regardless of income.
Under the OBBBA, the SALT phase-out reduces the $40,000 cap by 30% of the excess MAGI above $500,000. That is $300 for every $1,000 of MAGI above the threshold. The $30,000 incremental cap above the $10,000 floor is fully eliminated after $100,000 of excess MAGI. The cap returns to $10,000 at $600,000 MAGI (TY 2025). The cap and threshold increase by 1% per year starting TY 2026 through TY 2029, after which the provision expires and the cap reverts to $10,000.
The Alternative Minimum Tax disallows the state and local tax deduction. Under the AMT, you recalculate income without the SALT deduction. If your AMT liability exceeds your regular tax liability, you pay the AMT amount. The SALT deduction provides no benefit in that case.
Most middle-income filers are not subject to the AMT after TCJA 2017 significantly raised AMT exemptions. Filers with very high income and large itemized deductions may still be AMT-affected. This calculator estimates regular federal income tax savings only. If you have significant SALT deductions and high income, consult a tax professional to determine whether AMT applies.
The most common error we see is clients assuming they benefit from the SALT increase just because their SALT exceeds $10,000. The real question is whether they itemize. A client with $22,000 in SALT but $29,200 in total itemized deductions (SALT plus modest mortgage interest plus charitable giving) who files MFJ still takes the standard deduction ($30,000 in 2026) because the itemized total falls slightly short. For that client, the SALT increase has zero impact. The analysis changes if the same client has a larger mortgage or higher charitable contributions that push itemized deductions above the standard deduction threshold.
MFS filers require separate attention. The $20,000 MFS cap and $250,000 MAGI phase-out threshold often produce a different result than the same income run on MFJ. We regularly see MFS clients who assumed the SALT provision did not apply to them. The $20,000 cap is still double what they could deduct under TCJA's $5,000 MFS cap. For spouses in high-tax states where each has separate state income tax withholding, MFS can still produce meaningful SALT savings even at the reduced cap.
For pass-through entity owners, the PTET workaround under IRS Notice 2020-75 continues to interact with the individual SALT cap. A client who runs S-corp income through a state PTET election gets the entity-level state tax deducted above the line on the business return. That amount does not count against the $40,000 individual cap. We always flag this before assuming a client is capped: entity-level state taxes paid can substantially change the net effective SALT picture.
The SALT deduction is structurally different from the other OBBBA deductions for tips (IRC § 224), overtime (IRC § 225), and auto loan interest (IRC § 163(h)(4)). Those three are above-the-line deductions that do not require itemizing. SALT requires itemizing on Schedule A.
However, they can all be claimed in the same year by a filer who qualifies. An employee who earned tip income and bought a new U.S.-assembled vehicle in TY 2025 can claim the tip deduction and auto loan interest deduction on Schedule 1-A, and if they itemize, they can also claim up to $40,000 in SALT on Schedule A. The deductions do not reduce each other. Each is calculated independently.
If you also qualify for the above-the-line OBBBA deductions, use the No Tax on Tips Calculator, No Tax on Overtime Calculator, or Auto Loan Interest Deduction Calculator to estimate those savings separately.
If your SALT paid exceeds $10,000 and you itemize, run this calculator to estimate your incremental federal tax savings from the OBBBA SALT increase. Compare your total itemized deductions to your standard deduction to confirm itemizing produces a better result. The standard deductions for TY 2025 are $15,750 (single), $31,500 (MFJ), and $23,625 (HOH), as adjusted by the OBBBA.
If your SALT is between $10,000 and $40,000 and you are in a high-tax state, the OBBBA cap increase is likely your largest new deduction for TY 2025. Use the Standard Deduction vs. Itemized Calculator to confirm itemizing is still optimal after adding your mortgage interest and charitable contributions.
After calculating your SALT deduction, use the Refund Date Estimator to estimate how a larger Schedule A deduction may affect your expected refund. A higher itemized deduction reduces taxable income, which may increase your refund or reduce a balance due.
SALT is one of seven OBBBA provisions for TY 2025–2029. If you also have tip income, overtime pay, a new vehicle loan, children, or are age 65 or older, other OBBBA provisions may stack with your SALT benefit. Taxpayers age 65 or older should also run the Senior Standard Deduction Calculator to estimate the additional $6,000 §70103 deduction. See the OBBBA Tax Changes Guide for a complete comparison of all provisions.