Maxwell Borenstein, CPA
May 28, 2026

In This Article, You Will Find:   

  • The SALT deduction allows taxpayers who itemize to deduct eligible state and local taxes, including income taxes, sales taxes, real estate taxes, and certain personal property taxes.
  • Beginning in tax year 2025, the SALT deduction cap increased from $10,000 to $40,000 for most filers, with a reduced benefit for taxpayers above certain income thresholds.
  • Taxpayers in high-tax states, homeowners with significant property taxes, and households that already itemize deductions may benefit most from the higher SALT cap.
  • The increased SALT cap is temporary and is scheduled to remain in effect through 2029 before reverting to $10,000 in 2030.
  • Because the benefit depends on income, filing status, itemized deductions, and state and local tax exposure, taxpayers should revisit their tax planning strategy before year-end.

Understanding the State and Local Taxes (SALT) deduction can help you lower your federal tax liability by maximizing your itemized deductions. This deduction allows taxpayers to subtract certain state and local taxes from their federal taxable income.

Millions of taxpayers may be affected by the recent SALT updates, particularly those living in high-tax states. This article explains how SALT works, outlines the recent updates, and highlights what they may mean for taxpayers moving forward.

Understand What the SALT Deduction Is

SALT refers to state and local taxes paid to state and local governments. These taxes may be deductible on a federal income tax return. This applies if a taxpayer chooses to itemize deductions. The 2017 Tax Cuts and Jobs Act set a limit on this write-off.

This limit is often called the SALT deduction cap. It lets taxpayers claim up to $10,000 in total state and local taxes. The limit is $5,000 for those who are Married Filing Separately.

The SALT deduction generally includes:

  • State and local income taxes or general sales taxes
  • State and local sales taxes
  • Property taxes on real estate
  • Certain personal property taxes, such as vehicle taxes that are based on value

These taxes support vital state and local services such as schools, infrastructure, and public safety.

Review the Latest SALT Deduction Changes

The One Beautiful Bill Act (OBBBA) took effect in July 2025. It increased the SALT deduction limit for tax years 2025–2029. This change could boost your federal tax savings and lower your overall tax bill. Under this Act:

  • The SALT deduction cap has been increased to $40,000. This applies to taxpayers with Modified Adjusted Gross Income (MAGI) up to $500,000 ($250,000 for Married Filing Separately).
  • If your MAGI exceeds $500,000, the $40,000 cap is gradually reduced by 30% until it reaches $10,000. For example, if your income is $550,000, you will be able to deduct up to $25,000 in SALT. The $50,000 amount that exceeds the $500,000 causes the deduction to decrease by $15,000 ($50,000 * 30%).
  • The cap and income threshold will increase 1% annually through 2029 and will revert to $10,000 in 2030. For 2026, the cap rises to $40,400, and the phase-out threshold increases to $505,000.

See How the SALT Cap Affects Your Taxes

The SALT deduction cap can affect how you file taxes, particularly whether it makes more sense to itemize deductions or claim the standard deduction. If the SALT cap has limited your deductions in the past, it may be worth reassessing your tax strategy.

Additionally, taxpayers who reside in high-tax states and itemize their deductions could benefit from a lower federal tax bill if the SALT cap is increased in the future, as more of their state and local taxes may become deductible.

Who Benefits Most from SALT Changes

Changes to the SALT deduction cap affect taxpayers differently depending on where they live, how much they earn, and whether they itemize deductions.

  • Residents of high-tax states: Taxpayers living in states with higher income and property taxes are most likely to benefit from a higher SALT deduction cap.
  • Homeowners with high property taxes: Homeowners who reside in expensive housing markets often pay significant property taxes. A higher deduction cap would allow them to deduct a larger share of those taxes on their federal tax returns.
  • Taxpayers who itemize deductions: Households that already itemize deductions, often due to mortgage interest or charitable donations, are more likely to benefit from a higher deduction limit.

Understand Who May Benefit Less

Not all taxpayers may benefit equally from changes to the SALT deduction cap.

  • Taxpayers taking the standard deduction: SALT deductions are only available to taxpayers who itemize. If a taxpayer doesn’t own a home, they will not be able to deduct mortgage interest or real estate taxes. This makes it difficult to itemize unless the taxpayer has other major deductions, such as large medical expenses, large charitable donations, or a large tax liability. Households claiming the standard deduction may see little or no benefit from changes to the SALT cap.
  • Residents of low-tax states: Taxpayers living in states with no state income tax or relatively low property taxes may not reach the deduction cap even under current rules.
  • Very high-income taxpayers: If your MAGI is above $500,000, the benefit of the increased SALT deduction gradually decreases from $40,000 until the deduction is reduced to $10,000.

What the SALT Changes Mean for Taxpayers

Recent updates to the SALT deduction cap may create new tax planning opportunities for certain households, particularly those who itemize deductions and live in higher-tax states. With the cap increasing to $40,000 for qualifying taxpayers through 2029, some individuals may be able to deduct a larger share of their state and local taxes than in previous years.

However, the benefits will vary depending on how much you earn, your filing status, and whether you itemize deductions. Because the higher cap is temporary and subject to income thresholds, it is important to periodically review your tax strategy.

Understanding how SALT works and staying up to date on recent updates can help taxpayers make better financial decisions.

Conclusion

The updated SALT deduction rules may create meaningful tax planning opportunities, but the impact will vary by taxpayer. Income level, filing status, property taxes, state and local tax exposure, and whether you itemize deductions all play a role in determining the potential benefit.

As SALT rules continue to change, proactive planning is essential. Rubino can help individuals and businesses evaluate how recent SALT updates affect their tax strategy, identify planning opportunities, and stay ahead of state and local tax compliance requirements. Contact Rubino to discuss how SALT planning fits into your broader tax strategy.

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