What is the SALT cap in 2026 and how does the phaseout work?

The Tax Cuts and Jobs Act of 2017 capped the deduction for state and local taxes (SALT) at a flat $10,000 per year, for both single filers and married couples, for 2018 through 2024. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, raised the cap to $40,000 for 2025 and $40,400 for 2026 (rising 1% a year through 2029), but phases it back down for high earners: the cap falls 30 cents for every dollar of MAGI above $505,000, floored at the old $10,000. The floor kicks in above $606,333 of MAGI, so a household earning $700,000 gets no benefit from the higher cap at all. Married couples filing separately get half of each figure. In 2030 the cap reverts to a flat $10,000 unless Congress acts again.

What is the SALT workaround for pass-through businesses?

Many states have enacted Pass-Through Entity (PTE) tax elections that let S-corps and partnerships pay state income tax at the entity level. Because the SALT cap applies to individuals, not businesses, the entity-level state tax is deducted as a business expense before hitting the individual return. This effectively restores the SALT deduction for pass-through business owners, and remains valuable even after OBBBA's higher cap, since it's unaffected by the MAGI phaseout that limits the new cap for high earners. By 2026, most states with an income tax have enacted PTE elections. A PTE election can save a business owner earning $500,000 in pass-through income $20,000 to $50,000 annually depending on the state.

Does the SALT cap affect everyone equally?

No, and not just by filing status. The 2026 phaseout threshold ($505,000 MAGI) is the same for single filers and married couples filing jointly - it is not doubled for joint filers the way most tax provisions are, so a married couple loses the benefit of the higher cap at the same income level a single filer would. The cap (whatever level it lands at) is most impactful for homeowners in California, New York, New Jersey, Illinois, and Massachusetts who pay both high state income taxes and high property taxes. A household well under $505,000 MAGI benefits the most from OBBBA's higher cap; one well above it sees essentially no change from the old $10,000 TCJA cap.

Not Financial Advice. CalcMoney provides calculators for educational and planning purposes only. Results are estimates and do not constitute financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Terms apply.

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SALT Deduction Calculator2026 OBBBA Cap Impact

The 2026 SALT cap (up to $40,400) still costs California, New York, and New Jersey residents real money, especially once income phases the higher cap back down. See exactly what your cap is, what it costs you, and whether itemizing still makes sense.

Your real 2026 SALT cap after the OBBBA MAGI phaseout, and the dollar haircut against it
Additional federal tax owed because SALT exceeds your cap at your marginal rate
Whether itemizing still beats the standard deduction after the SALT limitation

OBBBA Sec. 70120 (IRC Section 164(b)(6)), effective 2025-2029

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SALT Deduction Calculator2026 OBBBA Cap Impact

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