SALT Cap Phase-Down: Five Worked Scenarios for 2026
The One Big Beautiful Bill Act raised the SALT deduction cap from the previous $10,000level to $40,400 for 2026. However, the increase comes with a phase-down: once MAGI exceeds $505,000, the cap is reduced by 30% of the excess until it reaches the $10,000 floor. Below are five scenarios that illustrate how the phase-down works at different income levels and filing statuses.
How the SALT phase-down works
The phase-down formula has three components:
- Starting cap: $40,400 (or $20,200 for MFS)
- Reduction: 30% of MAGI above the threshold ($505,000 for single/HoH/MFJ, $252,500 for MFS)
- Floor: The cap never drops below $10,000 ($5,000 for MFS)
In formula form: Effective cap = max($10,000, $40,400 - 30% x (MAGI - $505,000))
The cap reaches the $10,000 floor at approximately $606,333 MAGI. Above that level, the effective SALT cap is $10,000 regardless of how high income goes.
Scenario 1: Full cap, no phase-down ($200K MAGI)
Single filer, MAGI $200,000, pays $35,000 in state/local taxes
MAGI: $200,000
Phase-down threshold: $505,000
$200,000 is below $505,000: no reduction
Effective SALT cap: $40,400
Actual SALT paid: $35,000
Deductible amount: $35,000 (below the $40,400 cap)
For taxpayers with MAGI under $505,000, the full $40,400 cap applies. This taxpayer's $35,000 in state and local taxes is fully deductible because it falls below the cap. If they paid more than $40,400, the excess would be non-deductible.
Scenario 2: Moderate phase-down ($530K MAGI)
Single filer, MAGI $530,000, pays $50,000 in state/local taxes
MAGI: $530,000
Excess over threshold: $530,000 - $505,000 = $25,000
Reduction: 30% x $25,000 = $7,500
Effective SALT cap: $40,400 - $7,500 = $32,900
Actual SALT paid: $50,000
Deductible amount: $32,900 (capped)
At $530,000 MAGI, the cap is reduced but still well above the $10,000 floor. This taxpayer loses $7,500 of the cap increase but still deducts $32,900more than they could under the old $10,000 limit.
Scenario 3: At the floor ($606K MAGI)
MFJ couple, MAGI $606,000, pays $80,000 in state/local taxes
MAGI: $606,000
Excess over threshold: $606,000 - $505,000 = $101,000
Reduction: 30% x $101,000 = $30,300
Calculated cap: $40,400 - $30,300 = $10,100
Floor applies: $10,100
Actual SALT paid: $80,000
Deductible amount: $10,100
At $606,000, the calculated cap drops below the $10,000 floor, so the floor kicks in. This couple can deduct $10,100 in state and local taxes. Despite paying $80,000, the remaining $69,900 is not deductible. At this income level, the OBBBA increase provides no benefit beyond the prior-law $10,000 cap.
Scenario 4: MFS filer ($300K MAGI)
MFS filer, MAGI $300,000, pays $25,000 in state/local taxes
MAGI: $300,000
MFS threshold: $252,500
Excess over threshold: $300,000 - $252,500 = $47,500
Reduction: 30% x $47,500 = $14,250
Calculated cap: $20,200 - $14,250 = $5,950
Floor applies: $5,950
Actual SALT paid: $25,000
Deductible amount: $5,950
MFS filers face a lower starting cap ($20,200 vs. $40,400), a lower threshold ($252,500 vs. $505,000), and a lower floor ($5,000 vs. $10,000). This filer's MAGI of $300,000 pushes the cap down to the $5,000 floor, limiting the deduction to $5,950despite paying $25,000 in state and local taxes.
Note that while MFS filers cannot claim the OBBBA above-the-line deductions (tips, overtime, senior bonus), they can still claim itemized SALT deductions subject to the MFS cap and phase-down rules.
Scenario 5: MFJ at the threshold ($505K MAGI)
MFJ couple, MAGI exactly $505,000, pays $45,000 in state/local taxes
MAGI: $505,000
Phase-down threshold: $505,000
Excess over threshold: $505,000 - $505,000 = $0
Reduction: 30% x $0 = $0
Effective SALT cap: $40,400
Actual SALT paid: $45,000
Deductible amount: $45,000 (below the $40,400 cap)
A couple with MAGI at exactly the $505,000 threshold faces no phase-down reduction. Their full $40,400 cap is available. Even one dollar above this threshold triggers the 30% reduction, so MAGI of $506,000would reduce the cap by $300 to $40,100.
Note that the $505,000 threshold is the same for single, HoH, and MFJ filers. This is unusual in the tax code, where MFJ thresholds are typically double the single amount. Congress chose a flat threshold for the SALT phase-down, which means MFJ couples reach the phase-down at the same income as single filers.
Key takeaways
- Below $505,000: The full $40,400 cap applies. Most taxpayers fall here and benefit from the raised cap compared to the old $10,000limit.
- Between $505,000 and ~$606,333: The cap shrinks by $300 for every $1,000 of MAGI above the threshold. The benefit of the raised cap gradually disappears.
- Above ~$606,333: The cap hits the $10,000floor. These taxpayers are in the same position as under prior law.
- MFS filers: All amounts are halved. The starting cap is $20,200, the threshold is $252,500, and the floor is $5,000.
To model your own situation, use the SALT cap calculator. If you are deciding between the standard deduction ($16,100 single / $32,200 MFJ) and itemizing with SALT, the standard vs. itemized deduction comparison can help determine which produces the lower tax. For details on how the SALT phase-down interacts with the other OBBBA phase-outs, see the SALT cap phase-down glossary entry.