The New $40,000 SALT Cap: What Changed and Who Benefits
Part of our 2025 Tax Law Changes guide — the complete breakdown of the One Big Beautiful Bill Act.
One of the most consequential individual changes in the 2025 One Big Beautiful Bill Act is the increase in the state and local tax (SALT) deduction cap. Since 2018, itemizers had been limited to $10,000 of deductible state and local taxes. The new law raises that ceiling substantially — to roughly $40,000 for most taxpayers.
The key features
- A higher base cap (about $40,000, with a modest annual increase built in).
- A high-income phase-down. For taxpayers above a MAGI threshold (in the neighborhood of $500,000), the increased cap phases back down toward the old $10,000 floor.
- A scheduled reversion. The higher cap is temporary; absent further legislation it drops back to $10,000 later in the decade.
- Married filing separately generally gets half the cap.
Who actually benefits
The bigger cap only matters to taxpayers who itemize. With the standard deduction still high, many filers will continue to take the standard deduction and never touch SALT. The winners are itemizers in higher-tax states with significant property and income taxes — but not the highest earners, who lose the benefit to the phase-down.
Planning notes
Revisit the itemize-versus-standard decision for affected clients, watch the MAGI phase-down band closely (bunching or timing income can matter), and remember that the pass-through entity tax (PTET) workarounds many states enacted may still be advantageous depending on the client’s situation. Model both paths.
This article is educational and current as of its publication date. Federal tax provisions — dollar thresholds, phase-outs, and effective dates — change frequently and many items here are temporary. Confirm the current statute, IRS guidance, and your client’s facts before relying on any point below. Not legal or tax advice.
