OBBBA - SALT Deduction

SALT Deduction

The TCJA’s $10,000 SALT deduction limit is made permanent, but for tax years 2025 through 2029, the limit is temporarily increased.

Under OBBBA, the SALT deduction limit increases to $40,000 beginning in the 2025 tax year, and it rises by 1% each year through the 2029 tax year. The $40,000 cap applies to all taxpayers other than married taxpayers filing separately (MFS), whose deduction is limited to $20,000 (half of the overall limit). Starting in the 2030 tax year, the SALT deduction limit reverts to $10,000 ($5,000 for MFS).

Phasedown

For taxpayers, the SALT deduction limit is phased down, but it cannot fall below $10,000. The applicable limit (e.g., $40,000) is reduced by 30% of the amount by which the taxpayer’s MAGI exceeds the threshold amount (with the MFS threshold being half that of joint filers). Beginning in 2027 and through 2029, the threshold amount increases by 1% each year over the prior year.

For 2025, the phasedown threshold is $500,000–$600,000, and for MFS it is $250,000–$300,000. Because the deduction cannot be reduced below zero, even taxpayers exceeding the phasedown thresholds can still claim at least a $10,000 SALT deduction.

Example of SALT Limit Calculation

Ron and Jenny have MAGI of $550,000 in 2025 and SALT taxes of $60,000. Since their MAGI exceeds the $500,000 phasedown starting threshold, their SALT deduction is limited to $25,000 if they itemize deductions.

Calculation: $40,000 – (($550,000 – $500,000) × 30%).

In 2026, their MAGI increases to $610,000 and their SALT taxes rise to $65,000. Since their income exceeds the 2026 phasedown ending threshold of $606,333, their SALT deduction is reduced to $10,000 if they itemize deductions.