Tax Updates
What has changed: The new permanent SALT cap structure
The OBBBA made permanent modifications to the SALT deduction cap, ending years of temporary rules and political uncertainty. Key provisions of the finalized legislation include:
A permanent increase in the SALT cap from $10,000 to $40,000.
A phase-out of the $40,000 cap beginning at Modified Adjusted Gross Income (MAGI) of $250,000 (single filers) and $500,000 (joint filers).
The deduction phases down at a rate of 30% above these thresholds, until it returns to the original $10,000 cap for the highest earners.
The new cap structure aims to provide more equitable tax relief for middle- and upper-middle-income earners in high-tax states while limiting benefits for top earners.
This resolution ends years of negotiations between the House and Senate, who had previously disagreed on whether the cap should be expanded or maintained. The compromise reflects both revenue concerns and growing pressure from constituents in states like California, New York, and New Jersey.