Background
- The Tax Cuts and Jobs Act (TCJA) of 2017 capped the deduction for state and local taxes (SALT) at $10,000 ($5,000 if married filing separately). This applied to income, property, and sales taxes combined for itemizers from 2018 through 2025.
New Changes Effective 2025
- Starting tax year 2025 (returns filed in 2026), the SALT cap is raised to $40,000 for married filing jointly (MFJ) and $20,000 for married filing separately (MFS).
- The cap will increase by about 1% per year: $40,400 in 2026, $40,804 in 2027, $41,212 in 2028, $41,624 in 2029.
- In 2030, the cap reverts to $10,000 ($5,000 MFS) unless Congress acts.
- Phase-out: High earners with modified adjusted gross income (MAGI) above thresholds will see the $40,000 reduced gradually but never below $10,000.
Year-by-Year Cap (MFJ)
Year | Cap (MFJ) |
2024 | $10,000 |
2025 | $40,000 |
2026 | $40,400 |
2027 | $40,804 |
2028 | $41,212 |
2029 | $41,624 |
2030 | $10,000 (reverts) |
Planning Notes
- Itemizers benefit most; compare with the standard deduction each year.
High-tax state residents (CA, NY, NJ, etc.) gain the most during 2025–2029
- Watch income thresholds: MAGI phase-outs can reduce the benefit but not below $10,000.
- Consider timing state tax payments, property tax prepayments, and pass-through entity tax (PTET) elections.
- Plan for reversion: don’t assume the $40k cap continues after 2029.
Bottom line: For tax years 2025–2029, the SALT deduction limit is temporarily expanded, providing significant relief to many taxpayers before returning to $10,000 in 2030.