Limitation on individual deductions for certain state and local taxes, etc

(a) In general Section 164(b)(6) is amended— (1) by striking and before January 1, 2026, and (2) by striking $10,000 ($5,000 in the case of a married individual filing a separate return) and inserting the applicable limitation amount (half the applicable limitation amount in the case of a married individual filing a separate return). (b) Applicable limitation amount Section 164(b) is amended by adding at the end the following new paragraph: (7) Applicable limitation amount (A) In general For purposes of paragraph (6), the term applicable limitation amount means— (i) in the case of any taxable year beginning in calendar year 2025, $40,000, (ii) in the case of any taxable year beginning in calendar year 2026, $40,400, (iii) in the case of any taxable year beginning after calendar year 2026 and before 2030, 101 percent of the dollar amount in effect under this subparagraph for taxable years beginning in the preceding calendar year, and (iv) in the case of any taxable year beginning after calendar year 2029, $10,000. (B) Phasedown based on modified adjusted gross income (i) In general Except as provided in clause (iii), in the case of any taxable year beginning before January 1, 2030, the applicable limitation amount shall be reduced by 30 percent of the excess (if any) of the taxpayer's modified adjusted gross income over the threshold amount (half the threshold amount in the case of a married individual filing a separate return). (ii) Threshold amount For purposes of this subparagraph, the term threshold amount means— (I) in the case of any taxable year beginning in calendar year 2025, $500,000, (II) in the case of any taxable year beginning in calendar year 2026, $505,000, and (III) in the case of any taxable year beginning after calendar year 2026, 101 percent of the dollar amount in effect under this subparagraph for taxable years beginning in the preceding calendar year. (iii) Limitation on reduction The reduction under clause (i) shall not result in the applicable limitation amount being less than $10,000. (iv) Modified adjusted gross income For purposes of this paragraph, the term modified adjusted gross income means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.. (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2024.