SALT Deduction Calculator — New $40,000 Cap (2025–2029)
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.
Example: CA MFJ homeowner, MAGI $450K, $32K state income tax
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.
New $40,000 SALT cap (2025–2029)
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.
Filing & income
Phase-out starts at $500K (2025). Cap floors at $10K by $600K.
Used to estimate federal tax savings from itemizing.
SALT components
Other itemized deductions (for the comparison)
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
Itemize — it beats the standard deduction
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.
Itemized line breakdown
| 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 |
SALT cap at different MAGI levels
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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How the new $40,000 SALT cap works
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.
Who benefits most
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:
- Married filing jointly with MAGI under $500,000 (no phase-out)
- Owns a home with a mortgage ($15K–$25K of real estate tax)
- Lives in a state with 5–13% income tax, paying $20K–$40K of state income tax
- Already itemizes (or now will, because the new SALT cap pushes itemized totals above the standard)
Worked example — California MFJ at $450K MAGI
$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.
Phase-out math at a glance
| 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).
2029 sunset
Methodology
- SALT cap by year matches OBBBA 1%-per-year escalation: $40,000 (2025) → $41,624 (2029).
- Phase-out reduces the cap by 30¢ per $1 of MAGI above the threshold, floored at $10,000 ($5,000 MFS).
- Standard deduction is the IRS 2026 figure: $16,100 single/MFS, $32,200 MFJ, $24,150 HoH.
- Medical deduction applies the 7.5% AGI threshold automatically.
- Federal tax savings = (itemized − standard) × marginal bracket. This is an estimate, not the full liability.
Sources
Data and assumptions align with official publications. For verification and current figures:
- IRS — Tax brackets, rates, credits, inflation adjustments
Primary sources
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments, OBBBA-amended): IRS.gov
- Tax Foundation OBBBA analysis: taxfoundation.org
- One Big Beautiful Bill Act, Pub. L. 119-XX (July 2025), §70xx amending IRC §164(b)(6).
Frequently asked questions
What is the new SALT cap for 2026?
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.
Who benefits from the new $40,000 SALT cap?
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.
How does the MAGI phase-out work?
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.
Should I itemize or take the standard deduction?
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.
What happens when the cap reverts in 2030?
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.
Can I deduct sales tax instead of state income tax?
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.
Does the $40K cap apply to married filing separately?
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.
Is real estate tax part of SALT or a separate deduction?
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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