PTETaxDesk / 2026 State PTET & $40k SALT Guides / The 2026 $40,000 SALT Cap Torpedo ($500k-$600k MAGI): Why Marginal Tax Rates Hit 45.5%
The 2026 $40,000 SALT Cap Torpedo ($500k-$600k MAGI): Why Marginal Tax Rates Hit 45.5%
The 2026 $40,000 SALT Cap Torpedo ($500k-$600k MAGI)?
Under Public Law 119-21 (OBBBA § 70120), the $40,000 SALT deduction cap is reduced by 30 cents for every $1 of MAGI between $500,000 and $600,000 until it floors at $10,000. For a taxpayer in the 35% bracket, each additional $1,000 of income causes $1,300 of taxable income, creating a 45.5% effective federal marginal rate.
Under Public Law 119-21 (OBBBA § 70120), the $40,000 SALT deduction cap is reduced by 30 cents for every $1 of MAGI between $500,000 and $600,000 until it floors at $10,000. For a taxpayer in the 35% bracket, each additional $1,000 of income causes $1,300 of taxable income, creating a 45.5% effective federal marginal rate.
Open 2026 $40,000 SALT Cap vs. State PTET Calculator
2026 PTET & SALT Compliance Checklist
- Adopt a Written Partner/Shareholder PTET Consent Resolution: Keep signed authorization in your corporate or partnership minute book.
- Remit Cash-Basis Vouchers Before December 31, 2026: Under IRS Notice 2020-75, cash-basis entities can deduct 2026 PTET only to the extent paid by December 31, 2026.
- Avoid Overpayment Refunds (IRC § 111): Base your Q4 PTET payment on actual projected 2026 state liability so next year's state refund isn't recaptured as ordinary federal income.
Frequently Asked Questions
The 2026 $40,000 SALT Cap Torpedo ($500k-$600k MAGI)?
Under Public Law 119-21 (OBBBA § 70120), the $40,000 SALT deduction cap is reduced by 30 cents for every $1 of MAGI between $500,000 and $600,000 until it floors at $10,000. For a taxpayer in the 35% bracket, each additional $1,000 of income causes $1,300 of taxable income, creating a 45.5% effective federal marginal rate.