What is the SALT deduction cap for 2026 and 2027?

Under IRC §164(b)(6) as amended by the One Big Beautiful Bill Act (OBBBA), the State and Local Tax (SALT) deduction cap increased from $10,000 to $40,000 in 2025 and rises by 1% per year through 2029: for tax year 2026, the SALT cap is $40,400 ($20,200 for Married Filing Separately); for tax year 2027, the SALT cap is $40,804 ($20,402 MFS); for 2028, $41,212; and for 2029, $41,624, before reverting to $10,000 in 2030 unless extended.

How does the 30% MAGI phase-out work on the $40,400 SALT cap in 2026?

For tax year 2026, your $40,400 SALT cap begins phasing out once your Modified Adjusted Gross Income (MAGI) exceeds $505,000 ($252,500 for Married Filing Separately). For every dollar of MAGI above $505,000, your maximum SALT cap is reduced by 30 cents (30%), but never drops below the statutory floor of $10,000 ($5,000 MFS). Consequently, the $40,400 cap is reduced to the $10,000 floor once 2026 MAGI reaches $606,333 ($303,167 MFS).

What is the 45.5% 'SALT Torpedo' marginal tax rate?

If you pay $40,400+ in state and property taxes and your 2026 MAGI falls inside the phase-out window ($505,000 to $606,333), earning an extra $1,000 (from a bonus, RSU vest, capital gain, or Roth conversion) reduces your allowable SALT deduction by $300—causing your federal taxable income to rise by $1,300 instead of $1,000. In the 35% federal tax bracket, paying 35% on $1,300 equals $455 of tax on $1,000 of income—a 45.5% effective federal marginal tax rate (or 41.6% in the 32% bracket)!

Why is there a massive 'Marriage Penalty' in the SALT deduction cap?

Unlike the Standard Deduction (where Married Filing Jointly gets double the Single amount), the $40,400 SALT cap and $505,000 MAGI threshold in 2026 are identical for Single filers and Married Filing Jointly couples (and Married Filing Separately gets exactly half: $20,200 cap and $252,500 threshold). Two unmarried partners living together can deduct up to $80,800 ($40,400 each) with up to $1,010,000 in combined MAGI before phase-out, whereas a married couple is capped at $40,400.

How do S-Corp/Partnership PTET elections and 401(k) contributions beat the SALT phase-out?

High earners have two powerful levers: (1) Contributing to a pre-tax 401(k), Solo 401(k), Cash Balance plan, or HSA lowers your MAGI—if you are in the $505,000–$606,333 phase-out zone, every $10,000 of pre-tax retirement contributions not only deducts $10,000 directly, it also restores $3,000 of lost SALT deduction (a $13,000 total taxable income drop!). (2) Business owners with S-Corps, partnerships, or multi-member LLCs can elect a state Pass-Through Entity Tax (PTET under IRS Notice 2020-75), deducting state business income taxes uncapped above the line on Schedule E while reserving their personal $10,000–$40,400 SALT cap for home property taxes.

🏡 IRC §164(b)(6) · Schedule A Lines 5a–5e · 2026 $40,400 Cap · 30% Phase-Out

SALT Deduction Calculator (2026–2027): $40,400 Cap, 30% MAGI Phase-Out & 45.5% SALT Torpedo

Calculate your exact 2025–2029 State and Local Tax (SALT) deduction on Schedule A, Line 5e (up to $40,400 in 2026 and $40,804 in 2027). See whether Itemizing beats the Standard Deduction, test the 45.5% “SALT Torpedo” marginal tax rate on bonuses, RSU vests, and Roth conversions between $505,000 and $606,333 MAGI, and model S-Corp / LLC PTET & 401(k) MAGI shields.

✔️ 2025–2029 SALT Cap ($40,000 → $41,624) ✔️ 45.5% “SALT Torpedo” Bonus & RSU Simulator ✔️ S-Corp PTET & 401(k) MAGI Shield Optimizer

Built by R.K. · Last verified: October 20, 2026 · Checked against IRS Schedule A (Form 1040) Lines 5a–5e Instructions, IRS Rev. Proc. 2025-32 (2026 Standard Deductions), and IRS Notice 2020-75 (Pass-Through Entity Tax Rules).

🧮 Interactive SALT Cap, 45.5% Torpedo & PTET Workaround Calculator

Tax Year (1% Annual Cap Escalator):

Step 1: Filing Status, MAGI & State / Property Taxes

Filing Status (IRC §164(b)(6))

Modified Adjusted Gross Income (MAGI, $/yr) 30% phase-out starts at $505,000 ($252,500 MFS) in 2026.

State & Local Income (or Sales) Tax — Line 5a ($) State/city wage withholding, estimated payments, or sales tax.

Real Estate & Personal Property Tax — Lines 5b+5c ($) Home property taxes plus deductible DMV ad-valorem vehicle tax.

Mortgage Interest + Charity + Other Schedule A ($) Schedule A Lines 8–16 (home mortgage interest, charity, medical).

Marginal Federal Tax Bracket (%)

Your Schedule A SALT & Itemizing Verdict

Allowable SALT Deduction (Line 5e) $38,500 +$28,500 higher than the old $10,000 cap!

Extra Tax Saved vs. Old $10K Cap +$6,840/yr At your 24% marginal federal bracket

Total Schedule A vs. Std Deduction $56,500 Itemizing beats $32,200 Std Ded by +$24,300!

MAGI Cushion Before 30% Phase-Out $225,000 Phase-out starts at $505,000 MAGI

Schedule A Line 5d (Total State + Property Taxes Paid)$38,500

Your MAGI-Adjusted SALT Cap for Selected Year$40,400

Disallowed SALT (Capped or Phased Out)$0

2026/2027 Standard Deduction ComparisonItemize Wins (+$24,300 above $32,200 Std)

Step 1: Test Extra Income in the $505K–$606K Phase-Out Zone

Filing Status

Baseline MAGI Before Bonus / RSU / Roth ($) Try $515,000 (inside the $505K–$606.3K phase-out window).

Total State + Property Taxes Paid ($ / yr) Must exceed $10,000 for the SALT Torpedo to bite.

Planned Extra Income (Bonus, RSU Vest, Roth, $) Additional MAGI recognized this calendar year.

Statutory Federal Tax Bracket on the Extra Income (%)

45.5% “SALT Torpedo” Marginal Tax Verdict

True Effective Marginal Tax Rate 45.50% 35.0% statutory bracket + 10.50% SALT Torpedo!

SALT Deduction Destroyed -$15,000 Drops from $37,400 down to $22,400

Hidden Extra Tax From SALT Loss +$5,250 On top of $17,500 base tax on the $50,000 income

Total Federal Tax Cost of $50K $22,750 You keep only $27,250 before state/FICA tax!

Allowable SALT Before Extra Income$37,400

Allowable SALT After Extra Income$22,400

Taxable Income Added per $1,000 of Extra Income$1,300 (+30% clawback)

Step 1: Pre-Tax 401(k)/HSA Shield & Pass-Through PTET

Current Unshielded MAGI ($ / yr) Try $540,000–$606,000 to see the 30% SALT recovery boost.

Personal Property + W-2 State Taxes Paid ($ / yr) Taxes paid personally on Schedule A.

Added Pre-Tax 401(k) / Solo 401(k) / Cash Balance / HSA ($) Directly lowers MAGI and restores 30% of lost SALT cap!

S-Corp / Partnership / LLC State Tax Paid via PTET ($) Deducted uncapped above-the-line under IRS Notice 2020-75!

Marginal Federal Tax Bracket (%)

PTET & 401(k) MAGI-Shield Verdict

Total Federal Tax Saved $24,990 From $71,400 total taxable income reduction!

Personal SALT Cap Recovered +$16,400 Schedule A SALT jumps from $17,900 to $34,300

Uncapped Business PTET Write-Off $20,000 Bypasses Schedule A cap AND lowers MAGI!

Total Combined State + Property Deducted $54,300 $34,300 Schedule A + $20,000 entity PTET

New MAGI After 401(k)/HSA & PTET Deductions$525,000

Schedule A Personal SALT Before vs. After Shield$17,900 → $34,300

Effective Tax Return on $35K 401(k) Contribution45.5% ($15,925 tax saved!)

👶 Have a child under 18 or a parent age 65+? Check the new $1,000 Trump Account seed (Form 4547) or the $6,000/$12,000 Senior Bonus Deduction.

$1,000 Trump Account Calc → $6K/$12K Senior Tax Calc →

✅ 3 High-Impact SALT Rules for 2026 & 2027 (IRC §164(b)(6)): (1) The 1% Annual Cap Escalator: The SALT cap rose to $40,000 in 2025, $40,400 in 2026, and $40,804 in 2027 (halved for Married Filing Separately). (2) The 45.5% “SALT Torpedo” Window: Between $505,000 and $606,333 MAGI in 2026 ($510,050 and $612,730 in 2027), every $1,000 of extra income claws back $300 of SALT deduction—turning the 35% tax bracket into a 45.5% effective marginal rate! (3) Pre-Tax 401(k)/HSA & PTET Double-Benefit: Inside the phase-out window, every $1,000 contributed to a pre-tax 401(k) or HSA reduces taxable income by $1,300 ($1,000 contribution + $300 restored SALT deduction).

Quick Answer: How do you calculate your 2026–2027 SALT deduction on Schedule A?

Add your state and local income taxes (or general sales taxes) on Schedule A, Line 5a to your real estate and personal property taxes on Lines 5b and 5c. For tax year 2026, if your Modified Adjusted Gross Income (MAGI) is $505,000 or less ($252,500 Married Filing Separately), you can deduct up to $40,400 ($20,200 MFS) on Line 5e. If your 2026 MAGI exceeds $505,000, subtract 30% of the excess MAGI from $40,400—down to a minimum floor of $10,000 ($5,000 MFS) once MAGI reaches $606,333. For tax year 2027, the cap rises 1% to $40,804 and the phase-out threshold rises to $510,050.

1. 2025–2030 SALT Deduction Cap, MAGI Threshold & Complete Phase-Out Table

Under IRC §164(b)(6) as amended by the One Big Beautiful Bill Act (Public Law 119-21), both the base SALT cap and the MAGI phase-out threshold increase by 1% per year from 2026 through 2029 before reverting to $10,000 in 2030:

Tax Year	Maximum SALT Cap (Single / MFJ / HoH)	Married Filing Separately (MFS) Cap	30% Phase-Out Starts (MAGI Threshold)	Phase-Out Hits $10,000 Floor (Complete Ceiling)	Minimum Floor Above Ceiling
2025	$40,000	$20,000	$500,000 ($250,000 MFS)	$600,000 ($300,000 MFS)	$10,000 ($5,000 MFS)
2026 (Current)	$40,400	$20,200	$505,000 ($252,500 MFS)	$606,333 ($303,167 MFS)	$10,000 ($5,000 MFS)
2027	$40,804	$20,402	$510,050 ($255,025 MFS)	$612,730 ($306,365 MFS)	$10,000 ($5,000 MFS)
2028	$41,212	$20,606	$515,150 ($257,575 MFS)	$619,190 ($309,595 MFS)	$10,000 ($5,000 MFS)
2029	$41,624	$20,812	$520,302 ($260,151 MFS)	$625,715 ($312,858 MFS)	$10,000 ($5,000 MFS)
2030+ (Scheduled Sunset)	$10,000	$5,000	None (Flat $10K cap)	None	$10,000 ($5,000 MFS)

2. How “The SALT Torpedo” Creates a 45.5% Federal Marginal Tax Rate

For high-earning homeowners and professionals in California, New York, New Jersey, Connecticut, Massachusetts, Illinois, Oregon, Minnesota, and Maryland, the 30% SALT phase-out creates the steepest hidden marginal tax spike in the Internal Revenue Code:

2026 Single / Joint MAGI	30% Phase-Out Reduction	Allowable 2026 SALT Cap (Line 5e)	Effective Marginal Tax Rate in 32% Bracket	Effective Marginal Tax Rate in 35% Bracket
$505,000 or less	$0	$40,400 (Full Cap)	32.00%	35.00%
$525,000	-$6,000	$34,400	41.60% (32% × 1.30)	45.50% (35% × 1.30)
$550,000	-$13,500	$26,900	41.60% (32% × 1.30)	45.50% (35% × 1.30)
$575,000	-$21,000	$19,400	41.60% (32% × 1.30)	45.50% (35% × 1.30)
$606,333+	-$30,400 (Max Reduction)	$10,000 (Statutory Floor)	32.00% (Torpedo ends)	35.00% (Torpedo ends)

3. Three Proven Ways to Beat the SALT Phase-Out in 2026 & 2027

Maximize Pre-Tax 401(k), Solo 401(k), Cash Balance & HSA Contributions: Because the SALT phase-out is based on MAGI, every dollar you contribute to a pre-tax retirement plan or HSA while inside the $505,000–$606,333 zone delivers a 1.30× deduction multiplier—saving you 45.5 cents on the dollar in the 35% bracket!
Use an S-Corp, Partnership, or LLC Pass-Through Entity Tax (PTET) Election: Over 35 states allow pass-through businesses to pay state income tax at the entity level under IRS Notice 2020-75. Entity-level PTET payments are 100% deductible uncapped on Schedule E (reducing your federal AGI/MAGI directly), leaving your personal $10,000 to $40,400 Schedule A SALT cap free to shelter your home property taxes and spouse’s W-2 state withholding.
Bunch Charitable Contributions & Property Tax Installments Outside the Torpedo Year: If a one-time RSU vest or home/business sale pushes your 2026 MAGI well above $606,333 (where your SALT cap is locked at $10,000 anyway), defer optional income or accelerate pre-tax deductions into the year where your MAGI sits between $505,000 and $606,333.

Frequently Asked Questions: SALT Deduction Cap & Phase-Out (2026–2027)

Can I claim the $40,400 SALT deduction if I take the Standard Deduction?

No. Unlike the Schedule 1-A deductions (Overtime Code TT, $10,000 Car Loan Interest, and $6,000 Senior Bonus), the SALT deduction is an itemized deduction on Schedule A (Form 1040), Line 5e. It only lowers your tax bill if your total itemized deductions (allowable SALT + mortgage interest + charitable gifts + medical expenses over 7.5% of AGI) exceed your Standard Deduction ($16,100 Single / $32,200 Married Filing Jointly in 2026).

Does the SALT cap ever drop below $10,000 for high earners?

No (or $5,000 for Married Filing Separately). Under IRC §164(b)(6), the 30% MAGI phase-out can never reduce your allowable SALT cap below the $10,000 statutory floor ($5,000 MFS). Once your 2026 MAGI reaches $606,333 ($612,730 in 2027), your SALT cap remains flat at $10,000 regardless of how much higher your income goes.

Which taxes count toward the $40,400 Schedule A SALT cap?

Your SALT cap covers the sum of: (1) State and local personal income taxes paid during the calendar year (via W-2 withholding, 1099 withholding, or quarterly estimated payments)—or state and local general sales taxes if you elect sales tax instead of income tax on Line 5a; (2) State and local real estate property taxes on your primary residence and vacation homes (Line 5b); and (3) State and local personal property taxes based on vehicle value (Line 5c). Property taxes on rental properties (Schedule E) or business property (Schedule C) are deducted in full above the line and do not count against the Schedule A SALT cap.

Why is Married Filing Separately capped at $20,200 instead of $40,400?

To prevent married couples from splitting into two separate returns to claim $80,800 ($40,400 × 2), IRC §164(b)(6) halves the SALT cap ($20,200 in 2026), the phase-out threshold ($252,500 in 2026), and the minimum floor ($5,000) for Married Filing Separately filers.

Can I still use a state Pass-Through Entity Tax (PTET) election in 2026 and 2027?

Yes! For business owners, partners, and S-Corp shareholders whose household MAGI exceeds $505,000—or whose combined state income and property taxes exceed $40,400—electing into your state’s Pass-Through Entity Tax (PTET) regime remains the single most effective way to deduct state business income taxes above the line while simultaneously lowering your MAGI to preserve your personal Schedule A SALT cap.

Official IRS Primary Sources & References

Explore More 2026–2027 Tax, Schedule 1-A & Paycheck Calculators

⚠️ Tax Planning Disclaimer: This calculator provides educational federal income tax estimates based on IRC §164(b)(6) (as amended by Public Law 119-21), IRS Schedule A (Form 1040) instructions, IRS Revenue Procedure 2025-32, and IRS Notice 2020-75 current as of October 2026. Alternative Minimum Tax (AMT) interactions, state PTET credit mechanics, and state-level itemized deduction rules vary by jurisdiction. Always verify your filing strategy with a licensed CPA or tax advisor.