What changed in 2025
From 2018 through 2024 the itemized deduction for state and local taxes (income or sales tax, plus property tax) was capped at $10,000 ($5,000 married filing separately). The 2025 tax law raised the cap to $40,000 for 2025 and indexes it by 1% a year: $40,400 for 2026, and so on through 2029. In 2030 the cap is scheduled to return to $10,000.
The higher cap is not for everyone. Above $500,000 of modified adjusted gross income (also rising 1% a year, so $505,000 in 2026) the cap is reduced by 30 cents for each dollar of income over the threshold, until it reaches a floor of $10,000. A married person filing separately gets half of every figure: for 2025 a $20,000 cap, a $250,000 threshold and a $5,000 floor; for 2026, $20,200, $252,500 and $5,000.
Worked example
A married couple in New Jersey with $250,000 of income paid $14,000 of state income tax and $16,000 of property tax in 2025: $30,000 of SALT. Under the old rules only $10,000 counted; with $12,000 of mortgage interest their itemized total of $22,000 fell short of the standard deduction and the property tax bought them nothing. Under the new cap all $30,000 counts, the itemized total is $42,000, and itemizing beats the $31,500 standard deduction for 2025 by $10,500, about $2,520 of federal tax at their 24% bracket.
A single filer with $600,000 of income in 2026 is $95,000 over the threshold. The cap falls by 30% of that, $28,500, from $40,400 to $11,900. At $606,334 of income the cap would hit the $10,000 floor, so for high earners the deduction is roughly what it was before.
The cliff is real
Because the phase-down runs at 30 cents per dollar, income between $500,000 and about $600,000 is taxed at an unusually high effective rate for a taxpayer who is itemizing: each extra dollar is taxed at 35% and also removes 30 cents of deduction, which at 35% is another 10.5 cents. Anyone near the threshold with a choice about when to take income (a bonus, a Roth conversion, a capital gain) can run the calculator with each figure and see the deduction move.
What else the calculator assumes
It compares the itemized total with the standard deduction for your filing status, including the addition for filers 65 or older and, for 2025 through 2028, the $6,000 senior deduction. Enter your other itemized deductions at the amounts that actually count: charitable gifts count only above 0.5% of AGI from 2026, and medical costs only above 7.5% of AGI. State income tax refunds you deducted in an earlier year, the sales-tax election, and taxes on a business or rental property (deducted elsewhere, never capped) are outside its scope.
Official sources used on this page
- Rev. Proc. 2025-32 (2026 standard deduction and brackets): 2025-10-09
- IRS: Working Families Tax Cuts: provisions for individuals (SALT cap): page read 3 Sep 2026
- Topic 503, Deductible taxes: page read 3 Sep 2026
Every rule record names its source, revision and the date it was last verified; the results panel prints the ones your calculation used. Rules last verified 2 September 2026.