OBBBA Temporarily Expands SALT Deduction Limits
SALT Deduction Limits Temporarily Expanded
If you’ve been constrained by the $10,000 cap on state and local tax (SALT) deductions, the One Big Beautiful Bill Act (OBBBA) brings a significant—though temporary—change starting in tax year 2025.
From 2025 through 2029, the maximum deduction increases to:
- $40,000 if married filing jointly
- $20,000 if married filing separately
Beginning in 2026, these limits will adjust annually for inflation. Unless Congress acts to extend the change, the cap will return to $10,000 ($5,000 if married filing separately) in 2030.
Income Limits and Phaseout
The higher SALT deduction begins to phase out when your modified adjusted gross income (MAGI) exceeds:
- $500,000 for joint filers
- $250,000 for married filing separately
Once over the threshold, your allowable deduction is reduced by 30% of the excess MAGI, with a minimum deduction of $10,000 ($5,000 if married filing separately).
- For example - a joint filer with a MAGI of $550,000 would see their deduction limited to $25,000, rather than the full $40,000.
Other Considerations
You can still choose to deduct sales taxes instead of income taxes, which may benefit taxpayers with lower income taxes but higher sales or property taxes.
State-level SALT deduction workarounds for pass-through entities—such as S corporations, partnerships, and LLCs—remain in effect, allowing businesses to pay SALT at the entity level and pass the deduction through to owners.
Planning Opportunities
To take full advantage of the expanded deduction during the 2025–2029 window, consider strategies to manage your MAGI, such as:
- Spreading capital gains over multiple years
- Staging Roth IRA conversions
- Leveraging your state’s SALT workaround, if available
The (Collom) Barklee team can help you evaluate how this change fits into your broader tax strategy and ensure you’re making the most of the temporary increase.
