SALT deduction cap 2026: the $40,000 limit, the MAGI phase-down, and the MFS floor trap

The One Big Beautiful Bill Act (OBBBA) raised the federal cap on itemized state and local tax (SALT) deductions from $10,000 to $40,000 starting in 2025, rising about 1% a year through 2029, then reverting to a flat $10,000 in 2030 unless Congress acts again. Above $500,000 of modified adjusted gross income (MAGI), the cap phases down. None of this matters unless you itemize on Schedule A. Every figure below comes from our SALT deduction cap calculator, built directly from 26 U.S.C. §164(b)(6)-(7) and the IRS's 2025 Schedule A State and Local Tax Deduction Worksheet.

The basics: $10,000 to $40,000, then a 1%/year climb, then back down

• For 2025, the cap on itemized state and local income, sales, and property taxes combined is $40,000, up from $10,000. This is the "applicable limitation amount" added to 26 U.S.C. §164(b) by OBBBA section 70120.
• For 2026 it's $40,400, set directly in the statute. For 2027 through 2029, the statute escalates it by 101% of the prior year's dollar amount: $40,804 (2027), $41,212 (2028), $41,624 (2029).
• For 2030 and every year after, the cap reverts to a flat $10,000 ($5,000 married filing separately), and the MAGI phase-down described below stops applying entirely -- the statute's phase-down clause only runs "in the case of any taxable year beginning before January 1, 2030."
• These are fixed dollar figures through 2029, not inflation-indexed year to year the way some other tax brackets are -- each year's number is set directly in the statute or by the statute's own 101%-of-prior-year rule, not by a general inflation adjustment.

The MAGI phase-down

Above a MAGI threshold, the cap is reduced by 30% of the excess over that threshold -- but never below $10,000 (before any married-filing-separately halving; see below). The threshold is $500,000 for 2025 and $505,000 for 2026, then also escalates by 101%/year: $510,050 (2027), $515,150 (2028), $520,302 (2029).

Concretely: take the year's base cap, subtract 30% of (MAGI minus the threshold), and floor the result at $10,000. If your MAGI is at or under the threshold, there's no reduction at all and you get the full cap. If your MAGI is far enough over the threshold, the 30% reduction swamps the cap entirely and you're floored at $10,000 regardless of how much higher your MAGI goes -- for 2026, that floor kicks in once MAGI is about $101,333 over the $505,000 threshold, i.e. around $606,333 MAGI and up.

Married filing separately: this is the part worth reading twice

MFS gets three different treatments inside this one provision, and they are not all "just cut it in half":

• The MAGI threshold is explicitly halved. The statute says so directly: $250,000 for 2025, $252,500 for 2026, and so on, exactly half of the non-MFS threshold each year.
• The $10,000 floor, read in isolation, is NOT written as halved. The clause that sets the floor (26 U.S.C. §164(b)(7)(B)(iii)) says the phase-down "shall not result in the applicable limitation amount being less than $10,000" -- flat, with no married-filing-separately parenthetical, unlike the cap-definition clause and the threshold clause right next to it.
• But the floor still ends up effectively halved to $5,000 for MFS filers -- not because the floor clause itself is halved, but because of where the MFS halving actually happens in the statute. Paragraph (7) computes one number (call it the "applicable limitation amount": base cap, minus the phase-down, floored at $10,000 -- all computed without regard to filing status). That finished number is then plugged into 164(b)(6), and it's 164(b)(6) itself -- not paragraph (7) -- that says the applicable limitation amount is halved "in the case of a married individual filing a separate return." The halving happens once, to the whole finished result, after the floor has already been applied. So a fully phased-out MFS filer's floor is $5,000 -- half of $10,000 -- as a side effect of halving the finished number, not because paragraph (7)'s floor clause says $5,000 anywhere.

This matters because reading the floor clause by itself, out of context, makes it look like MFS filers might be stuck with an un-halved $10,000 floor even though their cap and threshold are both halved everywhere else -- an asymmetry that wouldn't make sense and isn't what actually happens. The IRS's own 2025 Schedule A instructions confirm the $5,000 number directly, both in the "What's New" summary ("will not be reduced below $10,000 ($5,000 if married filing separately)") and in the State and Local Tax Deduction Worksheet itself, where line 10 says to take "the smaller of the amount on line 9 (half the amount on line 9 if married filing separately) or" your actual SALT paid -- i.e., the halving is the very last step, applied to line 9's result (which already includes the floor), not baked into the floor earlier in the worksheet. Statute and IRS worksheet agree once you read the full structure rather than one clause in isolation.

Net effect for MFS: half the base cap, half the MAGI threshold, and an effective floor of $5,000 that comes from halving the floored result -- not from a separate "$5,000 floor" rule.

It only helps if you itemize

The SALT deduction is claimed on Schedule A, which only exists if you itemize instead of taking the standard deduction. If your SALT plus your other itemized deductions (mortgage interest, charitable giving, etc.) don't add up to more than your standard deduction, the higher SALT cap is worth exactly $0 to you, no matter how much state and local tax you actually paid. For 2026 the standard deduction is $16,100 single/MFS, $32,200 married filing jointly, $24,150 head of household (IRS Rev. Proc. 2025-32); for 2025 it's $15,750 single/MFS, $31,500 joint, $23,625 head of household (the OBBBA's own increase, not the smaller pre-OBBBA inflation-only figures). The IRS hasn't published 2027-2029 standard deduction figures yet, so our calculator carries the 2026 numbers forward as an editable placeholder for those years -- not a prediction.

The PTET workaround still exists, and isn't touched by this

If you own a partnership or S-corp, many states let the business elect to pay state tax at the entity level under a "pass-through entity tax" (PTET) regime, which the owner then deducts on the business's own return instead of the owner's individual Schedule A -- bypassing the 164(b)(6) cap entirely (IRS Notice 2020-75). OBBBA section 70120 doesn't touch or repeal PTET elections. This calculator and guide are only about the individual itemized SALT deduction on Schedule A; PTET is a different mechanism entirely and isn't modeled here.

Five worked examples

Comfortably under the threshold: $180,000 of MAGI is nowhere near the 2026 single/HOH/joint threshold of $505,000, so there's no phase-down -- the full 2026 cap of $40,400 applies, and $14,000 of SALT paid is well under that, so all $14,000 is deductible. Adding $9,000 of other itemized deductions gives a $23,000 itemized total, beating the $16,100 single standard deduction by $6,900.

High income, still under the threshold: $350,000 of joint MAGI is still under the $505,000 joint threshold (joint uses the same threshold as single/HOH -- only MFS gets a different, halved number), so again no phase-down, and $38,000 of SALT paid is under the $40,400 cap, so all of it is deductible. With $20,000 of other itemized deductions, the $58,000 itemized total beats the $32,200 joint standard deduction by $25,800.

Deep in phase-down, floored at $10,000: $650,000 of MAGI is $145,000 over the $505,000 threshold. 30% of $145,000 is a $43,500 reduction -- more than the entire $40,400 base cap -- so the cap floors at $10,000 (head of household isn't married filing separately, so this floor isn't halved). $45,000 of SALT paid is capped at $10,000 allowed, losing $35,000 to the cap. Added to $25,000 of other itemized deductions, the $35,000 itemized total still beats the $24,150 head-of-household standard deduction by $10,850 -- the cap costs this filer $35,000 of lost deduction, but itemizing is still the right call.

MFS, mid-phase-down: the MFS threshold for 2026 is half of $505,000, or $252,500. $300,000 of MAGI is $47,500 over that. 30% of $47,500 is a $14,250 reduction, bringing the unhalved base cap down to $40,400 - $14,250 = $26,150 -- well above the unhalved $10,000 floor, so the floor doesn't come into play here. That $26,150 is then halved for MFS to a $13,075 effective cap. $25,000 of SALT paid is capped at $13,075 allowed, losing $11,925. With $12,000 of other itemized deductions, the $25,075 itemized total beats the $16,100 MFS standard deduction by $8,975.

MFS, fully phased out: at $700,000 of MAGI, the excess over the $252,500 MFS threshold is $447,500, and 30% of that ($134,250) swamps the base cap many times over, so the unhalved result floors at $10,000 -- same floor as every other filing status, not yet halved. Only now, at the very last step, does the married-filing-separately halving apply to that floored $10,000, giving a $5,000 effective cap. $20,000 of SALT paid is capped at just $5,000 allowed, losing $15,000 to the cap. With only $5,000 of other itemized deductions, the $10,000 itemized total doesn't beat the $16,100 MFS standard deduction -- the standard deduction wins by $6,100, so this filer gets no benefit at all from itemizing, on top of losing $15,000 of SALT to the cap.

Rules to get right

• The cap applies to the combined total of state/local income (or sales) tax and property tax -- it's one $40,000-family number, not $40,000 for each.
• Married filing jointly uses the same, non-halved threshold and cap as single and head of household. Only married filing separately gets the halved numbers described above.
• The 2027-2029 cap and threshold figures ($40,804/$510,050, $41,212/$515,150, $41,624/$520,302) are the statute's own 1%/year escalator applied mechanically to the prior year's exact, unrounded figure; no IRS Revenue Procedure has set these years yet, so treat the whole-dollar rounding as a minor, immaterial-to-planning footnote rather than an official figure.
• After 2029, the cap reverts to a flat $10,000 ($5,000 MFS) with no MAGI phase-down of any kind -- high earners who were floored at $10,000 anyway during 2025-2029 will see no change in 2030, but moderate earners who were getting the full $40,000-plus cap will see a sharp drop unless Congress extends the higher cap.
• This is a deduction, not a credit -- it lowers taxable income, not your tax bill dollar for dollar. See what your itemized total is actually worth in tax dollars using the 2026 income tax calculator (enter the "Total itemized deductions" figure from the SALT calculator as its itemized deductions input).
• SALT isn't the only itemized deduction the OBBBA changed for 2026 -- gambling losses are now capped at 90% of losses instead of 100% (still capped at winnings). See the gambling loss deduction calculator if that applies to you.

Run your own numbers in the SALT deduction cap calculator, then see what your itemized total is worth in actual tax dollars in the 2026 income tax calculator. This is an illustration of the mechanics, not tax advice; a real return has details (other itemized deductions, PTET elections, state-specific rules, multiple income sources) these examples leave out.