Why Is My SALT Deduction Limited to $10,000? (2026)

The $10,000 SALT deduction limit was established by the Tax Cuts and Jobs Act (TCJA) in 2017 and applied to tax years 2018 through 2025. For 2026, the One Big Beautiful Bill Act raised the cap to $40,400, but the $10,000 figure remains as a floor. If you are still seeing a $10,000 limit, you are either filing under a pre-2026 tax year or your MAGI exceeds approximately $606,333, at which point the raised cap has fully phased down to the $10,000 floor.

Why the $10,000 limit exists

Before 2018, there was no dollar cap on the SALT deduction. Taxpayers who itemized could deduct the full amount of their state and local income taxes and property taxes, regardless of how much they paid. Taxpayers in high-tax states like California, New York, and New Jersey regularly deducted $30,000, $50,000, or more in SALT.

The TCJA changed this by imposing a $10,000 cap on the total SALT deduction. The stated rationale was to broaden the tax base and help fund the TCJA's lower individual income tax rates. Critics argued the cap disproportionately affected taxpayers in high-tax states, while supporters noted that the unlimited deduction had subsidized high state tax rates at the expense of federal revenue.

The TCJA cap: 2018 through 2025

The TCJA's $10,000 cap was straightforward. It applied to all filing statuses except Married Filing Separately, which received a $5,000 cap. There was no phase-down, no income-based adjustment, and no inflation indexing. Whether you earned $50,000 or $5,000,000, the same $10,000 limit applied.

The cap covered the combined total of state and local income taxes (or sales taxes, if elected) plus property taxes. Many homeowners in high-tax states found their SALT deduction cut by tens of thousands of dollars overnight.

The TCJA cap was originally set to expire after 2025, when individual tax rates were scheduled to revert to their pre-TCJA levels. This expiration was the catalyst for the OBBBA's SALT provisions.

The OBBBA increase for 2026

The One Big Beautiful Bill Act, signed into law in 2025, raised the SALT cap from $10,000 to $40,400 for tax years 2026 through 2028. However, the increase comes with a phase-down mechanism that did not exist under the TCJA.

The phase-down works as follows:

• Below $505,000 MAGI: The full $40,400 cap applies.
• Above $505,000 MAGI: The cap decreases by30% of each dollar of MAGI above the threshold.
• Above ~$606,333 MAGI: The cap reaches the $10,000 floor and stays there.

The $10,000 floor means the OBBBA did not eliminate the old TCJA cap for high earners. It preserved the $10,000 as a minimum. Taxpayers with MAGI above the phase-down range are in exactly the same position they were under the TCJA.

When you still see $10,000 in 2026

If your tax software or calculation shows a $10,000 SALT limit for 2026, one of these situations applies:

1. You are filing for a prior tax year. If you are preparing a 2025 or earlier return, the TCJA's flat $10,000 cap applies. The $40,400 cap only starts with tax year 2026.
2. Your MAGI exceeds ~$606,333. At this income level, the 2026 phase-down has reduced the cap to its $10,000 floor. The raised cap provides no additional benefit at this income.
3. You are filing MFS with MAGI above ~$303,167. MFS filers reach the $5,000 floor faster because their starting cap and threshold are both halved.
4. Your tax software has not been updated. Early in the filing season, some software may not yet reflect the OBBBA changes. Check for updates.

The phase-down to the floor

The formula that brings the cap from $40,400 back down to $10,000 is:

Effective cap = max($10,000, $40,400 - 30% x (MAGI - $505,000))

At $505,000 MAGI exactly, the cap is $40,400. Every $1,000 of MAGI above that reduces the cap by $300. The cap reaches the $10,000 floor when the reduction equals $30,400, which occurs at approximately $606,333 MAGI.

What to do about it

If you are subject to the $10,000 floor because your MAGI exceeds ~$606,333, there are limited options. The floor is a statutory minimum, not something that can be avoided through planning. However, strategies that reduce MAGI (such as maximizing pre-tax retirement contributions) could potentially bring your MAGI below the phase-down range and restore a higher cap.

If you are filing for a prior tax year (2025 or earlier), the $10,000 cap is simply the law for that year. There is no retroactive benefit from the OBBBA increase.

To calculate your exact SALT cap based on your 2026 MAGI, use the SALT cap calculator. For a detailed walkthrough of the phase-down at various income levels, see the SALT phase-down worked scenarios. For details on calculating MAGI, see how to calculate MAGI for the SALT phase-down.