OBBB SALT Cap 2026 State Comparison Calculator
Calculate the federal tax cost of the State And Local Tax (SALT) deduction cap for 2026 across major high-tax states. Models your actual state income tax + property tax against the OBBB-era SALT cap ($10,000 single/MFJ; phase-up to $40,000 MFJ for some high earners under OBBB provisions). Free — runs in your browser.
The SALT Cap After OBBB
The Tax Cuts and Jobs Act of 2017 imposed a $10,000 cap on the itemized deduction for State and Local Taxes (SALT) — combining state income tax, state and local sales tax, and property tax. The cap was originally scheduled to expire after 2025. The One Big Beautiful Bill Act (P.L. 119-21, July 4, 2025) preserved the cap with revisions: the base $10,000 cap remains for single filers and married filing separately ($5,000 MFS). For married filing jointly, OBBB created a higher cap that phases in based on income — at certain income levels the MFJ SALT cap rises toward $40,000 before phasing back down. Exact OBBB SALT phase-in mechanics depend on final IRS regulations and may vary from this model; verify with current IRS guidance. Source: IRS SALT Deduction Overview.
Highest-Impact States
States with the highest combined income + property tax burdens lose the most to the SALT cap. California (top rate 13.3%), New York (top rate 10.9% + NYC 3.876%), New Jersey (top rate 10.75%), Connecticut (top rate 6.99% + property), Hawaii (top rate 11%), and Oregon (top rate 9.9%) regularly hit the cap on six-figure incomes. A $400,000 California household with $35,000 in state income tax + $12,000 in property tax has $47,000 of SALT — capped at $10,000 federally, losing $37,000 of deduction. At a 32% federal marginal rate, that costs $11,840 in additional federal tax annually compared to a no-cap world. Source: Tax Foundation State Income Tax Rates.
Pass-Through Entity (PTE) Tax Workarounds
Most states (36+ as of 2025) have enacted Pass-Through Entity Tax (PTE) elections that allow S-corp shareholders and partnership/LLC partners to pay their state tax at the entity level, where it remains fully deductible against federal income — effectively bypassing the individual SALT cap. The PTE election is made annually at the entity level and must be coordinated with quarterly estimated payments. For a high-earning S-corp owner in California, a PTE election can preserve 4-7% of net income that would otherwise be lost to the cap. The IRS blessed PTE workarounds in Notice 2020-75. Most PTE elections must be made by a state-specific deadline early in the tax year — missing it disqualifies the workaround for that year. Source: IRS Notice 2020-75.
Other Workarounds: Charitable Conversion and State of Domicile
Several states (NY, NJ, CT, others) created charitable funds where residents can donate property tax to a state-controlled charity in exchange for a state tax credit — converting the non-deductible SALT into a federally-deductible charitable contribution. IRS regulations under §170 limit the effectiveness of these workarounds where the state credit exceeds 15% of the contribution. The cleanest workaround for high earners with location flexibility is changing tax domicile to a no-income-tax state (Florida, Texas, Tennessee, Nevada, Washington, Wyoming, South Dakota, Alaska, New Hampshire — interest/dividend tax only). Domicile changes require 183+ days physical presence and severing prior-state ties (driver license, voter registration, primary residence). See our Texas Income Tax Calculator and Florida Income Tax Calculator. Last updated May 2026.
Frequently Asked Questions
What is the SALT cap for 2026 under OBBB?
The One Big Beautiful Bill Act preserved the $10,000 base SALT cap for single filers ($5,000 for married filing separately). For married filing jointly, OBBB introduced an enhanced cap that phases up to as high as $40,000 at certain income levels before phasing back down. Final IRS regulations implementing the OBBB SALT phase-in were still being clarified through 2026 — confirm with your tax professional for your specific income.
What counts as a deductible SALT item?
SALT includes: state and local income tax (or general sales tax in lieu thereof — taxpayer's election); real estate property tax on your residence(s); personal property tax (auto registration based on value, in some states); and certain state-imposed taxes like Hawaii's GE tax in certain limited cases. Foreign income taxes are not SALT — they generate a foreign tax credit instead. State unemployment insurance withheld from employees is not deductible as SALT.
How does a Pass-Through Entity (PTE) tax election work?
In 36+ states, owners of S-corps, partnerships, and LLCs taxed as partnerships can elect to have the entity pay state income tax at the entity level. The entity-level tax is fully deductible against federal income (not subject to the SALT cap), and the owner receives a state tax credit or income exclusion. This effectively converts a non-deductible individual SALT to a deductible business expense. IRS Notice 2020-75 blessed this approach. The election typically must be made by an early-year state deadline.
Should I claim sales tax instead of income tax for SALT?
Make the income-vs-sales-tax election based on whichever is larger. Residents of no-income-tax states (Texas, Florida, etc) typically claim sales tax — IRS Publication 600 provides a sales tax table based on income, family size, and state, plus you can add actual receipts for big-ticket items (cars, boats, RVs). Residents of high-income-tax states almost always pick income tax. The election applies to total SALT before the cap — picking the larger amount maximizes pre-cap SALT, helpful when total is below the cap.
Does the SALT cap apply to AMT?
For regular federal income tax, the SALT cap applies. For AMT purposes (Form 6251), SALT is fully disallowed — meaning no SALT deduction at all in the AMT computation. The TCJA reduction in regular-tax SALT made AMT less binding for many filers because the regular-tax base became more similar to the AMT base. With OBBB-era cap retention, this dynamic continues for 2026.
Can I deduct property tax on multiple homes?
Yes — property tax on your primary residence, second home, and any number of personal-use properties is deductible, all aggregated against the SALT cap. Rental property tax is fully deductible on Schedule E without SALT cap impact (it is a business expense, not an itemized deduction). Foreign property tax was deductible under pre-TCJA rules but is now NOT deductible at all post-TCJA — OBBB did not restore this.
Are SALT refunds taxable income the next year?
Possibly, under the tax benefit rule. If you itemized last year and took an SALT deduction that exceeded the standard deduction by some amount, the refund is taxable up to that excess. With the SALT cap, many filers receive a refund of taxes that were never deductible (the over-the-cap portion) — that refund is NOT taxable. The IRS issued safe-harbor rules in Rev Proc 2019-11 to limit double-counting. Filers near the standard-vs-itemized line should run the calculation carefully.