July 8, 2025
Under the Tax Cuts and Jobs Act (TCJA), enacted in 2017, itemized deductions for state and local taxes (SALT) were limited to $10,000 ($5,000 for a married taxpayer filing a separate tax return). This cap was scheduled to expire after December 31, 2025. However, recently enacted One Big Beautiful Bill Act (OBBBA) modifies and extends the SALT deduction cap beyond that date.
The table below compares (1) the current law under the TCJA, (2) what the law would have been without the OBBBA and after the TCJA provisions expired, and (3) the new law under the OBBBA.
|
Category |
Current Law (TCJA) |
Post TCJA (No New Law) |
New Law (OBBBA) |
|
Itemized Deduction for State and Local T (SALT) |
Maximum deduction of $10,000 ($5,000 for married individuals filing separately) |
Beginning in tax year 2026, the SALT deduction cap would expire, and an unlimited SALT deduction would be allowed |
For tax years 2025-2029: **SALT deduction cap increased to $40,000 in 2025 ($20,000 for married individuals filing separately)
**Phaseout begins for taxpayers with income over $500,000 ($250,000 for married individuals filing separately)
**Both the cap and phaseout thresholds increase by 1% annually through 2029
Tax year 2030 and beyond: **SALT deduction cap reverts to TCJA levels ($10,000 / $5,000 for married individuals filing separately)
|