How to Calculate MAGI for the SALT Deduction Phase-Down (2026)
MAGI for the SALT deduction phase-down is your adjusted gross income (AGI) with certain excluded income added back, such as foreign earned income and tax-exempt interest. For most W-2 earners, MAGI equals AGI from Form 1040 line 11. The SALT cap of $40,400 begins to phase down once your MAGI exceeds $505,000, shrinking by 30% of each dollar above that threshold until it reaches the $10,000 floor.
What is MAGI for SALT purposes?
Modified adjusted gross income (MAGI) for the SALT phase-down is defined in the OBBBA as AGI with specific add-backs. The adjustments that get added back include:
- Foreign earned income excluded under IRC Section 911
- Tax-exempt interest income (e.g., municipal bond interest)
- Excluded income from Puerto Rico and U.S. possessions
If none of these apply to you, your MAGI is simply your AGI. This is the case for the majority of domestic W-2 employees. Self-employed filers and business owners also use AGI as their starting point, with the same add-backs if applicable.
The OBBBA uses the same MAGI definition for all four of its provisions: the tips deduction, overtime deduction, senior bonus deduction, and the SALT cap phase-down. A single MAGI figure determines how much of each benefit you receive.
Step-by-step: calculate your MAGI
Follow these steps to determine your MAGI for the SALT phase-down:
- Start with gross income. This includes wages, salaries, business income, capital gains, rental income, retirement distributions, and all other taxable income.
- Subtract above-the-line deductions. These appear on Schedule 1 and include educator expenses, HSA contributions, self-employment tax (half), IRA contributions, student loan interest, and the OBBBA deductions (tips, overtime, senior bonus) if applicable. The result is your AGI on Form 1040 line 11.
- Add back excluded income. If you claimed the foreign earned income exclusion under Section 911, add that amount back. Add back any tax-exempt interest (reported on line 2a of Form 1040). Add back any excluded possession income.
- The result is your MAGI. Compare this figure to the $505,000 threshold (or $252,500 for MFS) to determine whether your SALT cap is reduced.
Check MAGI against the threshold
Once you have your MAGI, compare it to the phase-down threshold for your filing status:
| Filing status | Phase-down starts at | SALT cap before phase-down |
|---|---|---|
| Single | $505,000 | $40,400 |
| Head of household | $505,000 | $40,400 |
| Married filing jointly | $505,000 | $40,400 |
| Married filing separately | $252,500 | $20,200 |
If your MAGI is at or below the threshold, you get the full SALT cap. If it exceeds the threshold, the cap is reduced by 30% of the excess. The formula is:
Effective cap = max($10,000, $40,400 - 30% x (MAGI - $505,000))
Worked example: $550K MAGI
Single filer, MAGI of $550,000, pays $42,000 in state and local taxes
AGI (Form 1040 line 11): $550,000
Foreign earned income exclusion: $0
Tax-exempt interest: $0
MAGI: $550,000
Excess over $505,000: $550,000 - $505,000 = $45,000
Reduction: 30% x $45,000 = $13,500
Effective SALT cap: $40,400 - $13,500 = $26,900
SALT paid: $42,000
Deductible amount: $26,900 (capped)
This filer's MAGI of $550,000 exceeds the $505,000 threshold by $45,000. The 30% reduction rate lowers the cap by $13,500, from $40,400 down to $26,900. Even though they paid $42,000 in state and local taxes, only $26,900 is deductible on Schedule A.
Example: below the threshold
MFJ couple, MAGI of $480,000, pays $38,000 in state and local taxes
Combined AGI: $480,000
Add-backs: $0
MAGI: $480,000
$480,000 is below $505,000: no phase-down
Effective SALT cap: $40,400
SALT paid: $38,000
Deductible amount: $38,000 (below the $40,400 cap)
Because this couple's MAGI of $480,000 falls below the $505,000threshold, the full $40,400 cap applies. Their $38,000 in state and local taxes is entirely deductible, assuming they itemize rather than taking the $32,200 standard deduction.
MAGI vs. AGI: when they differ
For most taxpayers, MAGI and AGI are identical. However, a few situations cause them to diverge:
- Expats using the foreign earned income exclusion. If you exclude up to $130,000 of foreign earnings under Section 911, that amount is added back for MAGI purposes. An expat with $200,000 in wages might have an AGI of $70,000 but a MAGI of $200,000.
- Municipal bond investors. Tax-exempt interest from muni bonds does not appear in AGI but is added back for MAGI. A retiree with $400,000 AGI and $120,000 in muni bond interest would have a MAGI of $520,000, pushing them above the phase-down threshold.
- U.S. possession exclusions. Income excluded under Sections 931 or 933 (Guam, Puerto Rico, American Samoa) is added back.
If you fall into any of these categories, calculating your MAGI before checking the SALT phase-down threshold is important. Your AGI alone may understate where you fall relative to the $505,000 cutoff.
MFS filers: different threshold
Married Filing Separately filers use a threshold of $252,500 instead of $505,000. The starting cap is also halved to $20,200, and the floor is $5,000 instead of $10,000. This means MFS filers reach the phase-down at half the income level and start with half the cap.
The MAGI calculation itself is the same for MFS filers. The difference is only in the thresholds applied once MAGI is determined.
For more on how the phase-down plays out across different income levels, see the SALT phase-down worked scenarios. To check your own MAGI against the threshold, use the SALT cap calculator. For details on the MAGI definition, see the MAGI glossary entry and SALT cap phase-down glossary entry.