What Is the SALT Deduction and Who Can Use It?
SALT stands for State and Local Tax. The SALT deduction lets you deduct certain state and local taxes you already paid when calculating your federal taxable income. It is claimed on Schedule A (Itemized Deductions) of Form 1040 — which means you must choose to itemize rather than take the standard deduction.
For years 2018–2024, the Tax Cuts and Jobs Act (TCJA) capped SALT at $10,000 ($5,000 married filing separately), a hard limit that left millions of homeowners in high-tax states like California, New York, New Jersey, and Illinois unable to fully deduct what they paid. The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, dramatically expanded that cap — and our calculator reflects every new rule.
What Taxes Qualify for the SALT Deduction?
The SALT deduction covers three categories of taxes:
- State and local income taxes — withheld from your paycheck or paid directly (e.g., California income tax, New York City income tax)
- State and local general sales taxes — you can elect this instead of income taxes if it's higher (common for residents of no-income-tax states like Texas, Florida, Nevada, and Washington)
- Real property (real estate) taxes — annual taxes on your home assessed by a state or local government
- Personal property taxes — such as annual vehicle registration fees based on the car's value (available in some states)
Note: You cannot deduct foreign real estate property taxes. Taxes tied to a trade or business (including rental properties) are deducted separately and do not count toward your SALT cap.
How to Calculate Your SALT Deduction: The Formula
Calculating your SALT deduction requires three steps. Each step is handled automatically by the calculator above, but here is the exact logic:
Step 1 — Calculate Total SALT Paid
(Or replace State Income Tax with State Sales Tax if higher)
Step 2 — Determine Your Applicable SALT Cap
Your base SALT cap depends on tax year and filing status:
| Tax Year | Single / MFJ / HoH | Married Filing Separately | MAGI Phase-Out Starts |
|---|---|---|---|
| 2018–2024 | $10,000 | $5,000 | N/A |
| 2025 ★ | $40,000 | $20,000 | $500,000 |
| 2026 ★ | $40,400 | $20,200 | $505,000 |
| 2027 | $40,804 | $20,402 | $510,050 |
| 2030+ | $10,000 (reverts) | $5,000 (reverts) | N/A |
Step 3 — Apply the MAGI Phase-Out (if applicable)
Adjusted SALT Cap = $40,000 − Phase-Out Reduction
(Floor: Cap cannot go below $10,000)
Your SALT Deduction = MIN(Total SALT Paid, Adjusted SALT Cap)
SALT Deduction Calculation Examples
Real-world scenarios show how the SALT deduction calculation works across different income levels in 2025 and 2026.
Example 1 — Married Couple, MAGI Below Phase-Out (2025)
Howard and Lisa file jointly. Combined state income tax: $22,000. Property taxes: $14,000. Total SALT paid: $36,000. MAGI: $420,000.
- MAGI ($420,000) is below the $500,000 phase-out — no reduction
- SALT paid ($36,000) is below the $40,000 cap
- SALT deduction: $36,000 (full amount)
- Extra deduction vs. old $10k cap: $26,000
- Federal tax savings at 24% bracket: $6,240
Example 2 — High Earner in MAGI Phase-Out Zone (2025)
Francine files single. State income tax: $26,000. Property taxes: $7,000. Total SALT paid: $33,000. MAGI: $530,000.
- MAGI excess: $530,000 − $500,000 = $30,000
- Phase-out reduction: $30,000 × 30% = $9,000
- Adjusted cap: $40,000 − $9,000 = $31,000
- SALT paid ($33,000) exceeds adjusted cap ($31,000)
- SALT deduction: $31,000
Example 3 — Fully Phased Out, Still Gets Floor (2025)
Vincent and Sandra file jointly. MAGI: $620,000 (above $600,000 full phase-out for 2025).
- MAGI excess: $620,000 − $500,000 = $120,000
- Phase-out reduction: $120,000 × 30% = $36,000
- Adjusted cap: $40,000 − $36,000 = $4,000
- But the $10,000 floor kicks in → SALT deduction: $10,000
Example 4 — California Homeowner (2026)
Rachel lives in the Bay Area. CA state income tax: $28,000. Property taxes: $15,000. Total SALT paid: $43,000. MAGI: $480,000. Tax year 2026.
- 2026 cap: $40,400. MAGI is below $505,000 — no phase-out
- SALT paid ($43,000) exceeds the $40,400 cap — capped at $40,400
- SALT deduction: $40,400
- Extra deduction vs. old $10k cap: $30,400
- Federal tax savings at 32% bracket: $9,728
SALT Deduction 2025 vs. 2026: Key Differences
Both years operate under the OBBBA framework but with slightly different numbers because the cap and phase-out threshold increase by 1% annually through 2029.
| Rule | 2025 | 2026 |
|---|---|---|
| SALT Cap (MFJ / Single / HoH) | $40,000 | $40,400 |
| SALT Cap (MFS) | $20,000 | $20,200 |
| MAGI Phase-Out Begins | $500,000 ($250,000 MFS) | $505,000 ($252,500 MFS) |
| Full Phase-Out (Floor Applies) | ≥ $600,000 MAGI | ≥ $606,333 MAGI |
| Phase-Out Rate | 30% of excess MAGI | 30% of excess MAGI |
| Minimum Floor | $10,000 ($5,000 MFS) | $10,000 ($5,000 MFS) |
| Standard Deduction (MFJ) | $31,500 | ~$32,200 |
The differences between 2025 and 2026 are modest — an extra $400 of deductible SALT and a slightly higher MAGI threshold before the phase-out kicks in. But over a 22% or 24% bracket, that $400 translates to $88–$96 of additional federal tax savings.
MAGI Phase-Out: How to Calculate MAGI for the SALT Deduction
The MAGI phase-out is the most misunderstood part of the new SALT rules. Here is the complete picture.
How Is MAGI Calculated for the SALT Deduction?
Your MAGI for SALT purposes starts with your Adjusted Gross Income (AGI) from Form 1040, line 11. You then add back certain deductions and exclusions that reduced your AGI:
- Student loan interest deduction
- IRA contribution deduction
- Foreign earned income and housing exclusions
- Tax-exempt interest income
- Excluded employer adoption benefits
For most W-2 employees without foreign income or large IRA deductions, MAGI ≈ AGI. Business owners with pass-through income may have a more complex picture.
The MAGI Phase-Out Cliff: Real-Dollar Impact
Every $1 over the $500,000 threshold (2025) costs you 30 cents of SALT deduction. At a 32% marginal rate, that means every extra dollar of MAGI in the phase-out zone costs you roughly $0.096 in additional federal tax just from lost SALT benefit — before even accounting for income tax on that dollar itself.
This creates a planning opportunity: taxpayers with MAGI between $500,000 and $600,000 (2025) may benefit significantly from strategies that reduce MAGI, such as maximizing 401(k) contributions, contributing to an HSA, or timing capital gain recognition.
How Is MAGI Calculated for the SALT Deduction — 2026 Update
For 2026 specifically: the same MAGI add-back rules apply, but the phase-out threshold increases to $505,000 (joint) and $252,500 (MFS). The full phase-out floor of $10,000 now kicks in at approximately $606,333 MAGI for joint filers (compared to $600,000 in 2025).
SALT Deduction vs. Standard Deduction: Which Is Better?
The SALT deduction only benefits you if your total itemized deductions exceed your standard deduction. With the 2025 standard deduction at $31,500 for joint filers, not everyone should itemize even with the expanded SALT cap.
2025 Standard Deduction Amounts
| Filing Status | 2025 Standard Deduction | Break-Even SALT Needed to Itemize* |
|---|---|---|
| Single | $15,750 | SALT alone must approach $15,750 (or combine with mortgage interest + charity) |
| Married Filing Jointly | $31,500 | SALT + mortgage interest + charity must exceed $31,500 |
| Head of Household | $23,625 | Must exceed $23,625 total itemized deductions |
| Married Filing Separately | $15,750 | SALT cap is only $20,000 for MFS |
*Assuming no other itemized deductions. Most homeowners with a mortgage will have mortgage interest pushing them well above the standard deduction threshold.
Our SALT deduction calculator automatically compares your itemized total against your standard deduction and shows you the net tax savings from itemizing. Use the Federal Income Tax Calculator to see your full tax picture.
SALT Deduction Tax Planning Tips for 2025–2026
The 2025–2029 window is a temporary planning opportunity. Here are actionable strategies to maximize your SALT deduction before the cap reverts to $10,000 in 2030.
1. Control Your MAGI to Stay Below $500,000
For joint filers near the $500,000 threshold, even modest MAGI management can preserve tens of thousands in SALT deductibility. Consider:
- Maximizing 401(k), 403(b), or SEP-IRA contributions (reduces AGI dollar-for-dollar)
- Contributing the maximum to a Health Savings Account (HSA) if on an HDHP
- Deferring year-end bonuses into next year if MAGI will push you into the phase-out
- Harvesting capital losses to offset capital gains that would increase MAGI
2. Bunch Deductions into Itemizing Years
If your SALT + mortgage interest + charity doesn't reliably beat the standard deduction every year, consider bunching: pay two years of property taxes in one year (where allowed), make larger charitable donations in that same year, and take the standard deduction the alternate year.
3. Check if Your State Has a PTET Workaround
Pass-through entity tax (PTET) elections let S corporations and partnerships pay state income tax at the entity level. Under IRS Notice 2020-75, this is deductible as a business expense — bypassing the individual SALT cap entirely. This remains available even under OBBBA and can be valuable for business owners in high-tax states even with the expanded SALT cap.
4. Deduct Sales Tax Instead of Income Tax If It's Higher
Residents of states without an income tax (Texas, Florida, Washington, Nevada, etc.) can elect to deduct state and local sales taxes instead. If you made large purchases — a car, boat, major home renovation, or RV — your actual sales tax paid may exceed what the IRS optional tables would give you. Keep those receipts.
5. Plan Ahead: SALT Cap Reverts to $10,000 in 2030
The higher cap expires after tax year 2029 unless Congress extends it. Taxpayers who can control the timing of large income events (investment sales, business exits, Roth conversions) may want to model their tax picture through 2029 to optimize across the planning window.
SALT Deduction by State: Where It Matters Most
The SALT deduction is most valuable in states with high income and/or property taxes. Here is how it plays out across major states:
| State | Top Income Tax Rate | Avg. Effective Property Tax | SALT Impact |
|---|---|---|---|
| California | 13.3% | 0.75% | Very High |
| New York | 10.9% + NYC surcharge | 1.54% | Very High |
| New Jersey | 10.75% | 2.23% | Very High |
| Illinois | 4.95% flat | 2.08% | High |
| Massachusetts | 9% (surtax) | 1.14% | High |
| Texas | None | 1.60% | Moderate (property only) |
| Florida | None | 0.89% | Low (sales tax deduction may apply) |
For a California-specific calculation, use the California Paycheck Calculator to estimate your CA state income tax, then plug that number into the SALT deduction calculator above.
About This Calculator — Accuracy & Disclaimer
This SALT deduction calculator reflects the federal rules we model from IRS publications (including SALT-cap guidance), OBBBA provisions as described in IRS materials, and state references for income and property tax estimates. We update when IRS or major state guidance changes — see the last-updated date in the trust row above.
This tool provides estimates only. It does not constitute tax, legal, or financial advice. Individual results may vary based on your complete tax situation. Please consult a qualified CPA or tax professional before making filing decisions. External references: IRS Schedule A instructions at irs.gov/schedule-a.