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New enhancements to the SALT deduction


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Beginning in 2025, there is a temporary increase to the $10,000 SALT [state and local tax] cap.


 From 2025 through 2029, you may deduct up to


  • $40,000 if married filing jointly, or

  • $20,000 if married filing separately.


The limits are adjusted annually for inflation, beginning in 2026. However, unless extended by Congress, the cap will revert to $10,000/$5,000 in 2030.


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 as a joint filer, you can deduct only $25,000 of your SALT, not the full $40,000.


You can choose to deduct sales taxes instead of income taxes if your income taxes are low but your 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.



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