November 13, 2025

SALT Cap Increases, What to Know

Most Crown clients are high income earners and therefore are generally people who itemize their deductions on their tax returns.  In your annual tax reviews, we’ve been highlighting the negative impact of the SALT cap on your itemized deductions.  Changes have been made to this cap via the One Big Beautiful Bill Act, and we want to ensure you understand those changes going into tax season.

Background
Under the Tax Cuts and Jobs Act of 2017 (TCJA), itemizing taxpayers who deduct state and local taxes (income tax and property tax) were limited to a maximum SALT deduction of $10,000 (married filing joint) for tax years 2018–2025. That cap has long been criticized, especially by taxpayers in high‐tax states like New York and California.

What changed in 2025
With the passage of the One Big Beautiful Bill Act (OBBB) in July 2025, the SALT cap was modified as follows:

• For tax years beginning in 2025, the SALT deduction cap is increased from $10,000 up to $40,000 (married filing joint).
• Beginning in 2026 through 2029, the cap will increase by 1% per year (so e.g., ~$40,400 in 2026).
• In 2030, the cap is scheduled to revert to $10,000 (unless further legislation changes that).
• There is also a phase-out based on Modified Adjusted Gross Income (MAGI):
  • Married filing joint: the phaseout begins at a MAGI of ~$500,000. Once MAGI exceeds this, the allowable SALT cap is reduced by 30% of the amount above the threshold. The deduction cannot be reduced to below the $10,000 floor.

Implications & things to know

• Taxpayers in high‐tax states (e.g., large property taxes, high state income tax) may see meaningful benefit from the higher cap (if their MAGI is below the phaseout threshold).
• If your income is above the phaseout threshold, the cap begins to shrink via the 30% reduction rule, so the benefit is muted. For example, one calculator shows: if MAGI is $560,000 (i.e., $60,000 over the threshold), the $40,000 cap is reduced by 30% × $60,000 = $18,000 → so allowable cap becomes ~$22,000.
• Because the cap reverts to $10,000 in 2030, this is a temporary relief (for tax years 2025-2029 under current law) unless Congress extends or modifies.