Modification of limitation on individual deductions for certain state and local taxes

(a) In general Section 164(b)(7) of the Internal Revenue Code of 1986 is amended to read as follows: (7) Applicable limitation amount (A) In general For purposes of this subsection, the term applicable limitation amount means— (i) $0 in the case of any taxpayer whose modified adjusted gross income exceeds the threshold amount, (ii) $5,000 in the case of a married individual filing a separate return, and (iii) $10,000 in the case of any taxpayer not described in clause (i) or (ii). (B) Threshold amount For purposes of this paragraph, the threshold amount shall be— (i) in the case of a joint return, $215,000, (ii) in the case of a head of household (as defined in section 2(b)), $161,250, and (iii) in the case of any taxpayer not described in clause (i) or (ii), $107,500. (C) Modified adjusted gross income For purposes of this paragraph, the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (D) Inflation adjustment In the case of any taxable year beginning after 2027, each of the dollar amounts in subparagraphs (A) and (B) shall be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2026 for calendar year 2016 in subparagraph (A)(ii) thereof. If any amount as increased under the preceding sentence is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50.. (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2026.