SALT Deduction Cap Increases Temporarily

If you've been frustrated by the $10,000 limit on state and local tax (SALT) deductions, there's some relief on the horizon. Starting in 2025, the cap will increase—at least for a few years:

• $40,000 for married couples filing jointly

• $20,000 for married filing separately

(These amounts will adjust for inflation beginning in 2026, but unless Congress acts, the cap will drop back to $10,000/$5,000 in 2030.)

Watch the Income Thresholds:

• If your MAGI is over $500,000 (joint) or $250,000 (separate), your deduction will be reduced.

• The phaseout equals 30% of the amount over those thresholds—though you'll never go below the original $10,000/$5,0000 cap.

• Example: At $550,000 MAGI (joint), your SALT deduction would be $25,000 instead of $40,000.

Other Things to Know:

• You can still choose between deducting sales tax or income tax—handy if your sales or property taxes are higher.

• The popular pass-through entity SALT workaround (for S corps, partnerships, and LLCs) isn't going away.

Planning Idea:

If you think you'll be near the phaseout range, you may want to explore ways to keep your MAGI lower—like spreading capital gains over multiple years, pacing Roth conversions, or using your state's pass-through SALT workaround.