What is State and local tax deduction cap?
In short
The state and local tax (SALT) deduction cap limits an individual's itemized deduction for state and local income (or sales) taxes and property taxes. The One Big Beautiful Bill Act raised it from $10,000 to $40,000 for 2025 ($20,000 for married filing separately).
Key takeaways
- The cap rises by 1% a year through 2029, then returns to $10,000 in 2030.
- It is reduced by 30% of modified adjusted gross income over $500,000 for 2025, but never below $10,000.
- Taxes paid in a trade or business or on rental property are deducted for adjusted gross income and aren't capped.
Example
A single filer with $600,000 of modified adjusted gross income loses 30% × $100,000 = $30,000, so the cap is $10,000 for 2025.
Where it's tested
REG: Individual Taxation: Adjustments & Deductions — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under the One Big Beautiful Bill Act, what is the state and local tax (SALT) deduction cap, and is it permanent?