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.
- The expansion of the SALT limits will increase the number of taxpayers who itemize deductions somewhat, but generally only in high-tax states.