The SALT cap limits the itemized deduction for state and local taxes (income, sales, and property taxes combined). Introduced at $10,000 in 2018, it turned state income tax from fully deductible into mostly nondeductible for high earners in high-tax states. The 2025 tax legislation raised the cap to $40,000 beginning in 2025, with the benefit phasing down for taxpayers with modified adjusted gross income above $500,000 and the cap scheduled to revert to $10,000 in 2030. The cap applies only to personal taxes on Schedule A: property taxes on rentals and business property remain fully deductible on the relevant business schedule. The dominant workaround for business owners is the pass-through entity tax, which moves the state tax deduction to the entity level and out of the cap's reach entirely.
SALT Cap
Primary authority: IRC §164(b)(6)
The authority behind it
IRC §164(b)(6)
Every entry in this glossary cites the statute, regulation, or IRS guidance behind it.
Worked example
A California couple with $700,000 of income pays over $60,000 of state income and property taxes. With the phase-down at their income level pushing their cap back toward $10,000, routing state tax through their S corporation's PTET election preserves a deduction the cap would erase.
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Related terms
Pass-Through Entity Tax (PTET)
A pass-through entity tax is a state-level workaround to the federal cap on state and local tax deductions.
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Itemized Deductions
5% of adjusted gross income, and casualty losses in federally declared disasters.
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Standard Deduction
The standard deduction is the flat, no-receipts amount every taxpayer may subtract from adjusted gross income...
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