How does the SALT Cap change with the OBBB?
The “One Big Beautiful Bill” (OBBB) was signed into law on July 4, 2025. It contains several tax-changing provisions including changes to the State and Local Tax (SALT) deduction.
What is the SALT deduction?
The SALT deduction allows taxpayers to deduct certain state and local taxes paid, including:
Since 2018, the SALT deduction has been limited by a federal cap.
What was the SALT cap before the OBBB?
Before the OBBB, the SALT deduction was capped at:
Any state and local taxes paid above these limits were not deductible on the federal return.
How does the SALT cap change under the OBBB?
Under the OBBB, the SALT cap is increased as follows:
Is the SALT cap increase permanent?
No. The SALT cap increase is temporary and applies only for certain tax years (2025 – 2029, with 1% increases each year). Unless Congress extends it, the cap may revert to prior limits after the specified period.
Who benefits most from the SALT cap increase?
Taxpayers most likely to benefit include:
Does the SALT cap change affect standard deduction filers?
No. If you claim the standard deduction, the SALT cap change does not directly affect your tax return. The benefit applies only to taxpayers who itemize deductions.
Sample Situation:
A couple filing jointly with $9,000 in state income taxes paid and $7,000 in property taxes would have had $16,000 in total SALT paid. Prior to OBBB that couple would’ve been limited to an IRS itemized deduction of $10,000 (due to the cap). After OBBB, that couple can itemize the full $16,000, resulting in a $6,000 additional deduction.
What is the SALT deduction?
The SALT deduction allows taxpayers to deduct certain state and local taxes paid, including:
- State and local income taxes (or sales taxes)
- Real estate (property) taxes
- Personal property taxes
Since 2018, the SALT deduction has been limited by a federal cap.
What was the SALT cap before the OBBB?
Before the OBBB, the SALT deduction was capped at:
- $10,000 per tax return, or
- $5,000 for married filing separately
Any state and local taxes paid above these limits were not deductible on the federal return.
How does the SALT cap change under the OBBB?
Under the OBBB, the SALT cap is increased as follows:
- $40,000 cap for married filing jointly or single filers
- $20,000 cap for married filing separately
Is the SALT cap increase permanent?
No. The SALT cap increase is temporary and applies only for certain tax years (2025 – 2029, with 1% increases each year). Unless Congress extends it, the cap may revert to prior limits after the specified period.
Who benefits most from the SALT cap increase?
Taxpayers most likely to benefit include:
- Homeowners with significant property taxes
- Residents of high-tax states
- High-income taxpayers who itemize deductions
- Married couples whose state and local taxes exceed $10,000 annually
Does the SALT cap change affect standard deduction filers?
No. If you claim the standard deduction, the SALT cap change does not directly affect your tax return. The benefit applies only to taxpayers who itemize deductions.
Sample Situation:
A couple filing jointly with $9,000 in state income taxes paid and $7,000 in property taxes would have had $16,000 in total SALT paid. Prior to OBBB that couple would’ve been limited to an IRS itemized deduction of $10,000 (due to the cap). After OBBB, that couple can itemize the full $16,000, resulting in a $6,000 additional deduction.
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