SALT Deduction Calculator 2026 — $40,000 OBBBA Cap

What Changed About SALT Under OBBBA

The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, quadrupled the federal SALT deduction cap from $10,000 to $40,000 for tax years 2025 through 2029. This was the biggest change to the SALT deduction since the Tax Cuts and Jobs Act (TCJA) first imposed a cap in 2018. The $10,000 ceiling was deeply unpopular in high-tax states like California, New York, New Jersey, Connecticut, Illinois, and Massachusetts, where typical homeowners often paid $15,000 to $40,000 in combined state income and property taxes. Under OBBBA, the same $40,000 cap applies to both single filers and married couples filing jointly — preserving the original TCJA quirk of no marriage adjustment. The law also retained the option to deduct state sales tax instead of state income tax (beneficial for residents of states with no income tax), but combined with property tax it still counts against the single $40,000 ceiling.

How the High-Income Phase-Out Works

Unlike the original TCJA flat cap, OBBBA built in a phase-out that claws back the higher cap for high earners. For 2026, the $40,000 cap is reduced by 30 cents for every dollar of adjusted gross income (AGI) above $500,000 for married filing jointly or $250,000 for single filers. The reduction continues until the effective cap hits the $10,000 floor, which cannot be reduced further. For example, a married couple with $700,000 AGI has $200,000 of excess income, producing a $60,000 reduction — but since that would push the cap below $10,000, it stops at the $10,000 floor. Practically, this means married couples fully phase down to $10,000 at roughly $1.1 million AGI, and single filers at roughly $850,000 AGI. Anyone below the $500,000 (MFJ) or $250,000 (single) threshold gets the full $40,000 cap with no phase-out.

State-by-State Impact — Who Benefits Most

The OBBBA SALT expansion disproportionately helps homeowners in high property-tax states. New Jersey residents have the highest average property tax bill in the country (around $9,500 per year), followed by New York, Connecticut, New Hampshire, and Massachusetts. Combined with state income taxes that can exceed 10% in California and New York, many middle- and upper-middle-income households were losing $15,000 to $30,000 of legitimate tax deductions under the old $10,000 cap. Under the $40,000 cap, a New Jersey homeowner paying $12,000 in property tax and $15,000 in state income tax now deducts the full $27,000 instead of being capped at $10,000 — a $17,000 bigger deduction that saves roughly $5,100 in federal tax at the 24% bracket. Residents of no-income-tax states (Texas, Florida, Tennessee, Washington) benefit less, since property tax alone rarely exceeds $10,000 for typical homes. Last updated: April 2026.

What Happens When OBBBA SALT Cap Expires in 2030

The OBBBA SALT provision is scheduled to sunset on December 31, 2029. Absent new legislation, the cap reverts to $10,000 for tax year 2030 and beyond — the same level that had applied under TCJA from 2018 through 2024. Tax planners recommend that high-bracket households in high-tax states consider accelerating state tax payments or charitable giving into tax years 2026 through 2029 while the higher cap is available. Many pass-through business owners (S-corps, partnerships, LLCs) already use state Pass-Through Entity (PTE) tax elections to bypass the individual SALT cap entirely by paying state tax at the entity level — this workaround is available in more than 30 states and remains valid regardless of what happens to the individual cap in 2030. Watch Congress carefully: the 2030 reversion creates a natural pressure point for another SALT debate, and the cap could be extended, modified, or eliminated depending on the political mix.

Disclaimer: Estimates only based on OBBBA as enacted July 2025. This is not tax advice. Verify with your CPA or at irs.gov before filing. Last updated: April 2026.