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OBBBA, signed July 2025, raised the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for tax years 2025 through 2029. Calculate how much SALT you can actually deduct after the MAGI phase-out, compare itemizing against the 2026 standard deduction, and see your estimated federal tax savings.
SALT deduction (new)
$40,400
SALT under old $10K cap
$10,000
Itemized total (new)
$67,400
Standard deduction (2026)
$32,200
A California MFJ couple at $450K MAGI with $32K of state income tax, $14K real estate tax, and a $22K mortgage-interest deduction now deducts $40,400 in SALT — versus only $10,000 under the old TCJA $10K cap. Total itemized: $67,400 vs. $32,200 standard. At a 32% marginal bracket, the recommendation to itemize saves about $11,264 in federal tax.
Source: FinCalc server-rendered example using the same formulas as the interactive calculator.
OBBBA (signed July 2025) raised the State and Local Tax deduction cap from $10,000 to $40,000 for tax years 2025 through 2029 (cap rises 1% per year). The cap phases out for MAGI over $500,000 (2025 levels) and floors back to $10,000 by MAGI $600,000. Reverts to $10,000 permanently in 2030.
Phase-out starts at $500K (2025). Cap floors at $10K by $600K.
Used to estimate federal tax savings from itemizing.
These are not part of SALT but they decide whether itemizing beats the standard deduction.
Only the amount over 7.5% of your AGI ($33,750) is deductible.
SALT deduction available
$40,400
Cap: $40,400
Full itemized total
$67,400
Standard: $32,200
Recommendation
Itemize
Itemizing saves $35,200
Estimated federal tax saved
$11,264
At 32% marginal rate
Your total SALT paid is $46,600; the cap for married-filing-jointly in 2026 is $40,400. That gives you $40,400 in deductible SALT — $6,200 is lost to the cap.
Adding $22,000 mortgage interest, $5,000 charitable, and $0 deductible medical, your itemized total is $67,400. The 2026 standard deduction for your status is $32,200.
Itemizing gives you $35,200 more in deductions — roughly $11,264 in federal tax saved at your 32% marginal rate.
| Line | Amount |
|---|---|
| State & local taxes (capped) | $40,400 |
| Home mortgage interest | $22,000 |
| Charitable contributions | $5,000 |
| Medical (over 7.5% AGI) | $0 |
| Total itemized | $67,400 |
| Standard deduction (compare) | $32,200 |
The cap reduces by ~30¢ for every $1 of MAGI above the threshold, until it floors at $10,000.
| MAGI | Reduction | Effective cap |
|---|---|---|
| $405,000 | $0 | $40,400 |
| $505,000 | $0 | $40,400 |
| $555,000 | $15,200 | $25,200 |
| $605,000 | $30,400 | $10,000 |
| $705,000 | $30,400 | $10,000 |
| $805,000 | $30,400 | $10,000 |
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From 2018 through 2024, the Tax Cuts and Jobs Act (TCJA) capped the federal State and Local Tax (SALT) deduction at $10,000 per return. That number was the same regardless of how high your real tax burden was — a homeowner paying $30,000 in California state income tax plus $20,000 in property tax could only deduct $10,000 total. It became the most contentious limit in TCJA.
The One Big Beautiful Bill Act (OBBBA), enacted July 2025, temporarily increases the cap to $40,000 for tax years 2025 through 2029. The cap and its phase-out threshold both grow 1% per year — so for 2026 the cap is $40,400 and the threshold is $505,000. Married filing separately gets exactly half.
The SALT deduction still aggregates the same three components: state and local income tax (or, by election, general sales tax), plus real estate tax, plus personal property tax. Mortgage interest, charitable contributions, and medical expenses are separate Schedule A lines that are added on top.
The new cap most benefits high-income homeowners in high-tax states — California, New York, New Jersey, Illinois, Massachusetts, Connecticut, Oregon, Maryland, Hawaii, and Washington D.C. A typical taxpayer who now gains $20K–$30K of additional deductions is:
$32,000 state income tax + $14,000 real estate tax + $600 personal property tax = $46,600 total SALT paid. Below the $500K phase-out threshold, the full $40,400 cap applies. SALT deductible: $40,400 (you lose $6,200 to the cap). Add $22,000 mortgage interest and $5,000 charitable, and itemized total is $67,400 — well above the $32,200 MFJ standard deduction. At a 32% marginal bracket, the extra $35,200 of deduction over standard saves about $11,264 in federal income tax.
| MAGI (2025 levels) | Reduction | Effective cap |
|---|---|---|
| ≤ $500,000 | $0 | $40,000 |
| $550,000 | $15,000 | $25,000 |
| $600,000 | $30,000 | $10,000 (floor) |
| $800,000 | $30,000 | $10,000 |
For each $1 of MAGI over the threshold, the cap drops by about $0.30 until it reaches the $10,000 floor at roughly $100K of excess MAGI. The 2026 threshold is $505,000 (and increases 1% annually thereafter).
Data and assumptions align with official publications. For verification and current figures:
Primary sources
Under the One Big Beautiful Bill Act (OBBBA, signed July 2025), the SALT deduction cap is $40,400 for 2026 (rising 1% per year through 2029). It covers state and local income tax (or sales tax) plus real estate and personal property tax. The cap was $10,000 from 2018 through 2024 under TCJA.
Mostly high-income homeowners in high-tax states — California, New York, New Jersey, Illinois, Massachusetts, Connecticut, Oregon, and Maryland. A married couple with $400K MAGI, $30K state income tax, $15K property tax, and a $6,500/mo mortgage typically gains $20K–$30K in extra deductible SALT versus the old $10K cap.
Starting at $500,000 MAGI (2025 baseline; $505,000 for 2026), the enhanced cap reduces by roughly 30¢ for every dollar of MAGI above the threshold. At $600,000 MAGI the cap reaches its $10,000 floor. The phase-out applies the same regardless of filing status, except MFS which uses half the cap.
Itemize if your total SALT (capped) + mortgage interest + charitable + medical-over-7.5%-AGI exceeds your standard deduction ($16,100 single / $32,200 MFJ for 2026). With the $40K SALT cap, many high-MAGI homeowners in CA/NY/NJ will now itemize — they were forced to take the standard deduction from 2018–2024.
Without further legislation, the SALT cap permanently reverts to $10,000 ($5,000 MFS) starting tax year 2030. This is built into OBBBA as a fiscal sunset. Most analysts expect Congress to revisit before 2030, but plan around the $10K cap returning.
Yes. On Schedule A you choose either state and local income tax OR general sales tax — not both. Sales tax is better in no-income-tax states (TX, FL, WA, TN, NV, SD, WY, AK, NH). The IRS publishes optional sales-tax tables based on income and state.
No. MFS gets exactly half the cap — $20,000 for 2025, $20,200 for 2026. The $500K MAGI phase-out threshold is the same for MFS, so MFS filers in the phase-out band hit the $5K floor faster.
Real estate tax is part of SALT. The cap covers the sum of state/local income (or sales) tax + real estate tax + personal property tax. Foreign real estate tax is NOT deductible since 2018. Mortgage interest is a separate Schedule A line and is not subject to the SALT cap.
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