5e — SALT Deduction After Limit Updated for tax year 2025

What this line means

The smaller of line 5d or $40,000 ($20,000 if married filing separately). This is the actual amount of state and local taxes you can deduct after the SALT cap. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, raised the cap from $10,000 to $40,000 for tax years 2025 through 2029. For filers with modified AGI above $500,000, the cap phases down at a rate of 30 cents for every dollar over $500,000, with a floor of $10,000. ¹

Does this apply to you?

• Everyone claiming state and local tax deductions enters the capped amount here
• If line 5d is $40,000 or less (and your MAGI is $500,000 or less), enter the full amount
• If line 5d exceeds your applicable cap, enter the cap amount
• If you are married filing separately, your cap is $20,000 (phasedown starts at $500,000 MAGI)

Easy to overlook

The SALT cap phases down for high earners The $40,000 cap is not a flat number for everyone. If your modified AGI exceeds $500,000, the cap reduces by 30% of the excess. At around $600,000 AGI (single), the cap phases all the way down to $10,000. Filers with income between $500,000 and $600,000 get a partial benefit from the higher cap. Run the phasedown calculation before assuming you get the full $40,000. ¹ [SOURCE: OBBBA — One Big Beautiful Bill Act SALT cap changes]

Pass-through entity tax (PTET) workaround still bypasses the cap Many states offer a pass-through entity tax election that lets S corps and partnerships pay state income tax at the entity level. This tax is deductible as a business expense on the entity’s return, not subject to the SALT cap. Even with the higher $40,000 cap, business owners with very high state tax bills may still benefit from the PTET strategy. ² [SOURCE: IRS Schedule A instructions — Line 5e]

Watch out for this

Assuming the old $10,000 cap still applies. The OBBBA raised the cap to $40,000 ($20,000 MFS) for tax years 2025 through 2029. Filers who prepared returns under the old rules or relied on outdated software may leave up to $30,000 of SALT deductions unclaimed. The cap reverts to $10,000 in 2030 unless Congress acts again.

Related lines on your return

• Line 5d — Schedule A — Total SALT before the cap (the uncapped amount)
• Line 7 — Schedule A — Total taxes paid (combines this line with line 6)
• Line 17 — Schedule A — Total itemized deductions