Tax Planning
Maximizing the Increased SALT Deduction and New Child Tax Credit Rules from the OBBB Act
With the One, Big, Beautiful Bill enacting significant changes to SALT deductions and child tax credit thresholds starting in 2025–2026, U.S. taxpayers should plan now to leverage these new opportunities.
By NomadicTax Research Team • 5-8 min read • April 21, 2026
## Overview
The One, Big, Beautiful Bill (OBBB) brings sweeping changes for individual taxpayers for tax years starting in 2025 & 2026. Two of the most impactful: the State and Local Tax (SALT) deduction cap has skyrocketed, and Child Tax Credit (CTC) rules have been updated.
## SALT Deduction Changes
- **New cap**: Taxpayers who itemize can now claim up to **$40,000** in SALT deductions in 2025 (and about $40,400 in 2026) for married couples filing jointly. A separate cap of ~$20,200 applies to married filing separately. ([irs.gov](https://www.irs.gov/newsroom/understanding-the-one-big-beautiful-bill-individual-tax-provisions-youtube-video-text-script?utm_source=openai))
- **Phaseout rule**: For those with modified adjusted gross income (MAGI) over **$500,000**, the SALT deduction begins to phase down. Full limit applies for MAGI ≤ $500,000, tapering off beyond that. ([irs.gov](https://www.irs.gov/newsroom/understanding-the-one-big-beautiful-bill-individual-tax-provisions-youtube-video-text-script?utm_source=openai))
## Child Tax Credit Adjustments
- **New maximum**: Each qualifying child under 17 now qualifies for a **$2,200** credit, with income phase-outs for joint filers starting at **$400,000**,$200,000 for single filers. ([irs.gov](https://www.irs.gov/newsroom/understanding-the-one-big-beautiful-bill-individual-tax-provisions-youtube-video-text-script?utm_source=openai))
- **Refundable portion**: Up to **$1,400** may be refundable under the additional child tax credit. To qualify for any refundable portion, taxpayers must have at least **$3,000 in earned income**. ([irs.gov](https://www.irs.gov/newsroom/understanding-the-one-big-beautiful-bill-individual-tax-provisions-youtube-video-text-script?utm_source=openai))
## Practical Planning Tips
- **Itemizers should re-evaluate whether to itemize**: With the higher SALT cap, it may now make financial sense to itemize deductions even in states with high property or income taxes.
- **Be aware of AGI thresholds**: Once your MAGI crosses $500,000, every dollar over reduces the SALT deduction by 30¢ per dollar (or equivalent adjustment). Use tax projection tools in 2025 and 2026 to estimate impacts.
- **Strategic timing of child-related expenses**: Since the refundable portion and phase-out thresholds depend on income and earned income, timing additional income or additional eligible expenses (childcare, dependents) may help stay under thresholds.
## Example
Suppose married couple, filing jointly, with MAGI $480,000 in 2025, paying $50,000 in combined state income and property taxes. Under old $10,000 cap, they could deduct only $10,000. Under OBBB, they can deduct full $40,000 cap—an extra $30,000 deduction. If MAGI climbs to $520,000, SALT deduction would begin being reduced (phaseout).
## Actionable Steps Now
1. Gather state and local tax receipts for 2025 & estimate 2026.
2. Project your MAGI for 2025 & 2026 before itemizing.
3. If you expect to exceed thresholds, explore income shifting or deferral (bonuses, self-employment income).
4. Chart child credits against expected income to understand non-refundable vs refundable benefits.
With these changes in place, early and informed tax planning can unlock meaningful savings. Don’t wait until tax season—start now.