Since the TCJA of 2017, certain itemized deductions have been restricted. The itemized deduction for State and Local Taxes (SALT) has been limited to $10,000 ($5,000 MFS). With the passage of the OBBB, those limitations are temporarily vastly expanded, and a phasedown of the expanded deduction occurs. The table below details those limitations.
SALT Limits
| Year(s) | SALT Limit | Phasedown threshold |
|---|---|---|
| 2018-2024 | $10,000 | N/A |
| 2025 | $40,000 | $500,000 |
| 2026 | $40,400 | $505,000 |
| 2027 | $40,804 | $510,050 |
| 2028 | $41,212 | $515,151 |
| 2029 | $41,624 | $520,302 |
| After 2029 | $10,000 | N/A |
- For the 2025 to 2029 tax years, the enhanced SALT limit (i.e., the part of the limit that exceeds $10,000) is reduced by 30 percent of the excess of the taxpayer’s modified adjusted gross income (MAGI) over the threshold indicated in the above table, but not below $10,000.
- SALT cap workarounds such as PTET are not affected by this legislation.
- With the prior SALT limit, only 8.5% of the tax returns we prepared for 2024 had total itemized deductions in excess of the standard deduction. The expansion of the SALT limits will increase the number of taxpayers who itemize deductions somewhat, but generally only in high-tax states.