OBBB Act: Temporary SALT Deduction Increase and Its Impact
Why the SALT Deduction Update Matters
With recent updates to federal tax law, individuals and business owners should be aware of key changes to the state and local tax (SALT) deduction. Understanding how these changes apply to your income level or business structure could help you make more informed decisions and avoid unexpected tax consequences.
The SALT Cap: A Quick Look Back
Before 2025, individuals who itemized deductions were limited to a $10,000 cap on state and local tax (SALT) deductions – a rule that impacted many in high-tax states. While some strategies helped reduce the impact, federal regulations narrowed those options. One workaround, using pass-through entities, remains available for certain business owners.
What the OBBB Act Changes in 2025
Starting in 2025, the SALT deduction limit will temporarily increase under the One Big Beautiful Bill Act (OBBB Act), offering short-term relief through 2029. However, this expanded deduction phases out for higher-income taxpayers and reverts back to the original cap in 2030.
| Tax Year | SALT Deduction Limit (Sing/MFS) | SALT Deduction Limit (MFJ) | AGI Threshold (Sing/MFS) | AGI Threshold (MFJ) |
|---|---|---|---|---|
| 2024 | $5,000 | $10,000 | – | – |
| 2025 | $20,000 | $40,000 | $250,000 | $500,000 |
| 2026 | $20,200 | $40,400 | $252,500 | $505,500 |
| 2027 | $20,602 | $40,804 | $255,025 | $510,050 |
| 2028 | $20,606 | $41,212 | $257,575 | $515,151 |
| 2029 | $20,812 | $41,624 | $260,151 | $520,302 |
| 2030 | $5,000 | $10,000 | – | – |
What This Means for You
These changes could significantly increase tax deductions. If you would like to know how the new SALT cap changes may benefit you, contact GFG for personalized guidance.