For years, the $10,000 cap on the State and Local Tax (SALT) deduction has been a pain point for taxpayers in high-tax states—especially those with significant property taxes or state income tax liabilities. But a major shift is coming.

Thanks to the Omnibus Budget and Benefits Bill Act (OBBBA), the SALT deduction cap will temporarily increase from 2025 through 2029, offering meaningful relief to affected taxpayers. Here’s what you need to know.

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📈 The New SALT Cap: Higher, But Not Permanent

Starting in 2025, the SALT deduction limit jumps from $10,000 to $40,000 for married couples filing jointly (and single filers, as the cap isn’t doubled for joint filers under current law). This enhanced limit will increase by 1% annually through 2029 due to inflation indexing:

Year	SALT Deduction Cap
2025	$40,000
2026	$40,400
2027	$40,804
2028	$41,212
2029	$41,624

In 2030, the cap reverts back to $10,000, unless Congress acts again.

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⚖️ Phaseout for High-Income Taxpayers

The benefit isn’t universal. A phaseout applies to taxpayers with Modified Adjusted Gross Income (MAGI) above certain thresholds:

• 2025 threshold: $500,000
• Threshold increases by 1% per year thereafter (e.g., $505,000 in 2026, $510,050 in 2027, etc.)

For every dollar your MAGI exceeds the threshold, your enhanced SALT cap is reduced by 30 cents. However—and this is critical—the deduction cannot fall below the original $10,000 cap, even for very high earners.

Example:
In 2025, a taxpayer with $600,000 MAGI exceeds the $500,000 threshold by $100,000.
Reduction = 30% × $100,000 = $30,000
Enhanced cap = $40,000 – $30,000 = $10,000 (the floor).

So, only taxpayers with MAGI between $500,000 and ~$566,667 in 2025 will see a partial reduction. Above that, they’re effectively capped at $10,000 anyway.

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🔍 No New Restrictions on Workarounds

Notably, the OBBBA does not include provisions that would limit existing state-level SALT workarounds—such as pass-through entity (PTE) tax elections or charitable contribution strategies. This means states can continue offering these mechanisms, and eligible taxpayers may still leverage them alongside the higher federal cap.

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💡 Planning Implications

• Homeowners in CA, NY, NJ, IL, and other high-tax states may regain significant itemized deductions.
• Consider timing state tax payments or bunching deductions in 2025–2029 to maximize benefit.
• High-income earners near the phaseout threshold should model their MAGI carefully—small adjustments could preserve thousands in deductions.

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The Bottom Line

The SALT cap expansion is a temporary but impactful change. While it doesn’t eliminate the deduction’s limitations, it restores flexibility for many middle- and upper-middle-income households who were squeezed by the 2017 TCJA cap.

Start planning now—especially if you’re approaching the $500K MAGI mark. The window for this relief closes after 2029.

Disclaimer: This blog post is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional before making decisions based on these provisions.