SALT Deduction

The State and Local Tax (SALT) deduction allows itemizers to deduct state income taxes (or sales taxes), local income taxes, and property taxes.

SALT Cap History

2025 Phase-Out Rules

The $40,000 cap phases out for high earners:

If MAGI > $500,000:
  Reduction = (MAGI − $500,000) × 30%
  Effective cap = $40,000 − Reduction
  Floor = $10,000 (minimum cap)

At ~$600,000 MAGI, the cap reverts to the original $10,000.

Who Is Most Affected?

The SALT cap primarily impacts:

• Homeowners in high-property-tax areas (NJ, CT, NY suburbs, IL)
• High earners in high-income-tax states (CA, NY, NJ, OR)
• Those whose combined state income tax + property tax exceeds $40,000

Sources

• IRS: State and Local Tax Deduction FAQ
• Tax Foundation: SALT Deduction Analysis
• One Big Beautiful Bill Act (2025 SALT Cap)