OBBBA Enhances Your SALT Deductions
If the $10,000 cap on state and local tax (SALT) deductions limits your write-offs, here’s good news: the One Big Beautiful Bill Act (OBBBA) temporarily increases the cap starting in 2025.
From 2025 through 2029, you may deduct up to
From 2025 through 2029, you may deduct up to
- $40,000 if married filing jointly, or
- $20,000 if married filing separately.
The limits adjust annually for inflation beginning in 2026. But unless extended by Congress, the cap returns to $10,000/$5,000 in 2030.
There’s a catch. The increased deduction phases out if your modified adjusted gross income (MAGI) exceeds
There’s a catch. The increased deduction phases out if your modified adjusted gross income (MAGI) exceeds
- $500,000 (joint filers), or
- $250,000 (married filing separately).
The phaseout reduces your SALT deduction by 30 percent of MAGI in excess of the threshold, with a floor of $10,000 or $5,000. For example, if your MAGI is $550,000, you can deduct only $25,000 of your SALT, not the full $40,000.
You can still choose to deduct sales taxes instead of income taxes—useful if your income taxes are low but sales or property taxes are high.
Importantly, state-level SALT deduction workarounds for pass-through entities (such as S corporations, partnerships, or LLCs) remain in place. These allow business entities to pay SALT at the entity level and pass through the deduction to owners—effectively bypassing the federal cap.
To maximize your deduction, consider managing your MAGI by
You can still choose to deduct sales taxes instead of income taxes—useful if your income taxes are low but sales or property taxes are high.
Importantly, state-level SALT deduction workarounds for pass-through entities (such as S corporations, partnerships, or LLCs) remain in place. These allow business entities to pay SALT at the entity level and pass through the deduction to owners—effectively bypassing the federal cap.
To maximize your deduction, consider managing your MAGI by
- spreading capital gains over multiple years;
- staging Roth IRA conversions; or
- leveraging your state’s SALT workaround, if available.