SALT stands for State And Local Taxes. It’s basically state and local income taxes and property tax. The 2017 Trump tax law capped the tax deduction for SALT at $10,000. If you paid more than $10,000 in state and local taxes, the amount above the $10,000 cap wasn’t deductible.
The SALT cap primarily affected high earners in high-tax states. Legislators from those states had been demanding that the SALT cap be raised or repealed. The 2025 Trump tax law — One Big Beautiful Bill Act — finally raised the SALT cap for the next few years.
Temporary SALT Cap Increase
The SALT cap goes from $10,000 to $40,000 in 2025 (one-half for married filing separately). The cap will further increase by 1% a year until 2029. Then it returns to $10,000 in 2030.
| Year | SALT Cap |
|---|---|
| 2025 | $40,000 |
| 2026 | $40,400 |
| 2027 | $40,804 |
| 2028 | $41,212 |
| 2029 | $41,624 |
| 2030 | $10,000 |
I pay more than $10,000 in state income tax and property tax. With the SALT cap increase, my SALT deduction will be uncapped because it’s less than $40,000. Does this mean my total deductions will increase now?
Stay In Standard Deduction
Nearly 90% of taxpayers take the standard deduction. That percentage will drop a little bit after the SALT cap increase, but it’s expected that over 80% of taxpayers will still take the standard deduction.
I’m in this camp. I took the standard deduction when the SALT cap was $10,000. I will continue to take the standard deduction even though I pay more than the old cap in state and local taxes. This is because when I add my other itemizable deductions (mortgage interest, charity donations, …) to the total state and local taxes I pay, it’s still lower than the standard deduction.
You will get no increase in your deductions from the SALT cap increase if you took the standard deduction under the old cap, and you’ll still take the standard deduction under the new cap (except for the increase in the standard deduction itself, unrelated to the SALT cap).
Switch to Itemizing
You will get a partial increase if you took the standard deduction before, and you will switch to itemizing after the SALT cap increase.
You get a partial increase because you must pass the hurdle of the standard deduction first. Taking the standard deduction gives you an allowance of free deductions. It’s free because everyone gets the standard deduction; you don’t have to do anything to get it. Switching from the standard deduction to itemized deductions means now you must pay for the allowance that used to be free with a part of your itemized deductions. Your deductions will increase only by what remains after you pay for the free allowance.
For example, suppose you have $5,000 in non-SALT itemizable deductions. You have $15,000 in total itemizable deductions under the old SALT cap, and the standard deduction is $31,500 for married filing jointly. You grab the $16,500 free allowance when you take the standard deduction. Suppose now your total itemized deductions under the new SALT cap are $45,000. Your SALT cap increases by $45,000 – $15,000 = $30,000, but your total deductions only increase by $45,000 – $31,500 = $13,500. You must use $16,500 from your $30,000 increase to pay for the allowance that used to be free.
Continue Itemizing
You will get the full increase if you were already itemizing deductions, and you’ll continue to do so. An increase in the SALT cap increases your SALT deduction to the amount you paid in state and local taxes, up to the new cap. This increase adds to your itemized deductions dollar for dollar.
Income-Based Phaseout
However, the new cap isn’t $40,000 for some high earners, because it has an income-based phaseout. The SALT cap drops by 30% of the Modified Adjusted Gross Income (MAGI) above $500,000. When the MAGI reaches $600,000, the SALT cap is back to the old $10,000.
The MAGI for the phaseout is the AGI for most people. It doesn’t add back untaxed Social Security or tax-free muni bond interest. The “modified” part is only for foreign earned income exclusion and residents in Puerto Rico, Guam, American Samoa, and the Northern Mariana Islands.
The table below shows how the SALT cap is phased out with income. Interpolate for an income between two rows in this table.
| 2025 MAGI | SALT Cap |
|---|---|
| $500,000 or less | $40,000 |
| $510,000 | $37,000 |
| $520,000 | $34,000 |
| $530,000 | $31,000 |
| $540,000 | $28,000 |
| $550,000 | $25,000 |
| $560,000 | $22,000 |
| $570,000 | $19,000 |
| $580,000 | $16,000 |
| $590,000 | $13,000 |
| $600,000 or more | $10,000 |
The starting point for the phaseout also increases by 1% a year through 2029. There’s no phaseout in 2030 when the SALT cap goes back to $10,000.
| Year | Phaseout Starts At |
|---|---|
| 2025 | $500,000 |
| 2026 | $505,000 |
| 2027 | $510,050 |
| 2028 | $515,151 |
| 2029 | $520,302 |
| 2030 | No phaseout |
Marriage Penalty
The $500,000 income threshold for the phaseout is the same for both single and married filing jointly. It carries a huge marriage penalty. Two single persons, each earning $400,000, can deduct up to $80,000 between the two of them. A married couple earning $800,000 is phased out to a $10,000 cap. Married filing separately doesn’t help because both the phaseout threshold and the cap are cut in half.
Higher Marginal Tax Rate
The SALT cap phaseout also increases the marginal tax rate in the phaseout income range. The tax bracket in that income range is normally 32% or 35%. Because a $10,000 increase in the phaseout income range also reduces the SALT cap by $3,000, the marginal tax rate becomes 32% * 1.3 = 41.6% or 35% * 1.3 = 45.5% when the SALT paid is limited by the cap.
High-earners in the phaseout income range should do all-out pre-tax contributions to lower their AGI.
Calculator
I created a calculator to show whether you’ll see no increase, a partial increase, or a full increase from the new SALT cap. The calculator takes into account both the standard deduction and the SALT cap phaseout at higher incomes. It calculates the federal income tax before and after the SALT cap increase to show the tax savings.
[Email readers: The calculator doesn’t work in emails. Please go to the website to use the calculator.]
The calculated tax does not include the Net Investment Income Tax (NIIT). Nor does it consider Alternative Minimum Tax (AMT).
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Most people will see no benefit from the SALT cap increase because they will continue to take the standard deduction. Some will see a partial increase in their deductions when they start itemizing. Only people who were already itemizing deductions before will see the full increase, unless they get phased out.
You’ll find more deep dives on recent changes from the 2025 Trump tax law in the full OBBBA series.
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