Call (703) 880-8412Latest updatesContact us

Tax Planning Resource Center

The SALT deduction cap under the 2025 tax law

The 2025 tax law quadrupled the cap on itemized state and local tax deductions, but not for everyone, and not permanently.

Updated November 2026 · VG CPA PC advisors

The new cap

For 2025, the cap on itemized deductions for state and local income, sales and property taxes rose from $10,000 to $40,000 ($20,000 for married filing separately). It increases by 1% a year through 2029 and returns to $10,000 in 2030.

Taxpayers who take the standard deduction get no benefit, so the higher cap matters most to people with large property and income tax payments who itemize.

The income phase-down

The higher cap is reduced by 30% of modified adjusted gross income above $500,000 (also indexed), but not below $10,000. Taxpayers with income around $600,000 or more often end up back near the $10,000 cap.

Managing income around the threshold, through retirement contributions, timing of bonuses or gains, or PTET elections, can preserve more of the deduction.

Planning

Compare itemizing with the standard deduction each year. Bunching property tax payments or charitable gifts into one year can make itemizing worthwhile. Business owners should still evaluate PTET elections, since business-level state tax is outside the cap entirely.

Remember that the alternative minimum tax does not allow the SALT deduction, so high deductions can trigger AMT in some cases.

Questions

Frequently asked questions

Can I deduct state taxes paid for a prior year?

State income taxes are deductible in the year paid, subject to the cap.

Does the cap apply to rental property taxes?

No. Property taxes on rental and business property are deducted against that income, outside the cap.

Is the cap per person or per return?

Per return, with half for married filing separately.

Start a conversation

Need help with this?

Tell us what you need. A senior advisor will reply within one business day.