For the 2025 U.S. federal tax year, a married couple filing jointly itemizes deductions and has modified adjusted gross income (MAGI) of $300,000, well below the applicable phase-down threshold. Under IRC Section 164(b)(6) as amended by the One Big Beautiful Bill Act, what is the maximum combined deduction available to this couple for state and local income, sales, and property taxes?
- $40,000, the increased combined cap that applies for tax years 2025 through 2029 to joint filers whose MAGI does not exceed the $500,000 phase-down threshold, up from the $10,000 cap that applied under the original TCJA limitation
- $10,000, because the One Big Beautiful Bill Act only raised the SALT cap for single filers and left the joint-filer cap unchanged at its original TCJA level
- $20,000, the joint-filer cap under the One Big Beautiful Bill Act, which is double the $10,000 cap that applied to married-filing-separately taxpayers under the original TCJA limitation
- There is no dollar cap at all for 2025, because the One Big Beautiful Bill Act fully repealed the SALT deduction limitation enacted by the Tax Cuts and Jobs Act
Why A? And why not the others?
Correct answer: A. $40,000, the increased combined cap that applies for tax years 2025 through 2029 to joint filers whose MAGI does not exceed the $500,000 phase-down threshold, up from the $10,000 cap that applied under the original TCJA limitation
The One Big Beautiful Bill Act raised the overall combined limit on the itemized deduction for state and local income, sales, and property taxes under IRC Section 164(b)(6) from $10,000 to $40,000 ($20,000 for married taxpayers filing separately) for tax years 2025 through 2029, with the cap reduced, but not below $10,000, for taxpayers whose MAGI exceeds $500,000. Since this couple's MAGI of $300,000 is below that phase-down threshold, the full $40,000 cap applies to their combined state and local tax deduction. The option asserting the increase applies only to single filers is wrong because the statute raises the combined cap for joint filers to the same $40,000 figure, with a separate $20,000 cap only for married-filing-separately taxpayers, not a rule that excludes joint filers from any increase. The option describing a $20,000 joint-filer cap is wrong because $20,000 is the figure that applies specifically to married-filing-separately taxpayers under the amended statute, not to a couple filing a joint return. The option claiming the limitation was fully repealed is wrong because the amendment increased and eventually reverts the cap rather than eliminating it; a $10,000 cap resumes after the 2029 tax year.
Source: 2025 Instructions for Schedule A (Form 1040), Itemized Deductions (irs.gov/pub/irs-pdf/i1040sca.pdf); IRS Topic no. 503, Deductible taxes