Key Takeaways:
- In 2025, the OBBBA raised the SALT deduction cap to $40,000, up from $10,000 the previous year.
- The high federal SALT cap keeps rising by 1% annually through 2029.
- High-tax State residents benefit from SALT stacking by placing assets in multiple tax-filing trusts.
- Distributing assets over several tax-paying entities prevents AGI phase-outs from nullifying the higher deductions.
The One Big Beautiful Bill Act (OBBBA) presents taxpayers with the opportunity to stack SALT deductions, making it possible to save thousands of dollars. High-tax state residents can now itemize more deductions, in effect avoiding "double taxation".
The new law increased the state and local tax (SALT) deduction cap from $10,000 to $40,400 (in 2026) for taxpayers who itemize. This new cap is much higher than the standard federal SALT deduction ($16,100 for single filers), making itemizing more appealing.
Placing assets in non-grantor trusts spreads the deductions over several entities. However, the trust must report its own income and itemize on Form 1041.
High-net-worth taxpayers in high-tax states can especially benefit from amending existing trusts to avoid phasing out the higher deduction cap.
This article explains how to benefit from the revised tax deductions from 2026 through 2029.
How To Use Trusts to Manage Tax Obligations
Trusts are common estate planning tools that allow grantors to set aside gifts and inheritance for their loved ones. If you maintain control of the assets in a trust, the trust's tax obligations are reported on your income.
However, you can use a non-grantor trust that files its own taxes and manages its own liabilities. You will lose control over the assets within the trust, but proper planning ensures that the arrangement serves your best interest.
Irrevocable non-grantor trusts can itemize and thus claim the increased tax deductions. Distributing the high-cap deductions over several entities saves you money by reducing taxable income.
Careful planning is necessary when using or amending trusts for tax management because the IRS scrutinizes them for misuse and tax evasion. Additionally, inadequate planning can result in multiple trusts being treated as a single trust (IRC section 643(f)).
What is SALT stacking?
In 2025, the OBBBA temporarily raised the federal SALT cap to 40,000 from $10,000. That cap has since increased to 40,400 in 2026 and will keep increasing by 1% annually through 2029.
Although the new cap is considerably higher than $10,000, high-tax state residents still end up with expensive tax obligations that can run into hundreds of thousands of dollars.
SALT stacking is a tax-planning strategy that circumvents the $40,400 federal SALT cap. It involves placing assets in multiple taxable trusts that itemize deductions. These multiple deductions add up to exceed the cap for personal or joint returns.
SALT cap limits and AGI phase-outs to watch out for
As mentioned, the $40,400 SALT cap is temporary. It will rise by 1% each year until 2029, but afterward revert to the regular $10,000. This fact makes the 2026-2029 window a critical time to leverage the higher deductions.
Remember that if your income exceeds half a million dollars, the higher SALT cap starts to phase out, although it cannot drop below the $10,000.
The table below highlights the rising SALT cap for the next five years.
| Year | New SALT Deduction Cap Limit | New AGI Phase-Out Limit |
|---|---|---|
| 2025 | $40,000 | $500,000 |
| 2026 | $40,400 | $505,000 |
| 2027 | $40,804 | $510,050 |
| 2028 | $41,212 | $515,151 |
| 2029 | $41,624 | $520,303 |
| 2030 | $10,000 | - |
The last column shows the Modified Adjusted Gross Income (MAGI) amount at which your SALT deductions begin to reduce by 30 cents for every dollar over the limit. In 2026, a $606,333 AGI phases out the 40,400, meaning your SALT deductions go back to the minimum of $10,000.
How to Amend Trusts to Benefit from the 2026 SALT Stacking in California
Existing trusts with unfavorable terms can be amended to benefit from SALT stacking from 2026 through 2029. You may need to work with a tax professional to ensure your amendments are not only legal but also financially sound.
The goal is to have assets in trusts that can itemize and claim more SALT deductions. Irrevocable non-grantor trusts function best in these circumstances.
You can amend trusts using the following methods.
From grantor to non-grantor trust decanting
Decanting involves moving assets from an existing trust to a new one with improved terms. In this case, you would be creating a new irrevocable trust, a separate entity that reports taxes on its income.
This move may improve tax efficiency in high-tax states such as California, New York, and New Jersey. Trust decanting must follow local and federal laws. The California Uniform Trust Decanting Act (Probate Code §§ 19501 et seq.) requires a 60-day notice to all concerned parties before making the switch.
Before decanting into a non-grantor trust, consider whether you are willing to relinquish all or most control over the assets.
Modification by consent
State laws may allow you to modify the terms of a trust to leverage the new SALT stacking. California Probate Code 15404(a) states that a trust can be modified if the grantor and all beneficiaries consent in writing.
Use a trust protector
A trust protector may be able to amend the trust's provisions to make the terms more favorable without court involvement. However, the current trust document must have named the trust protector and granted them such authority.
Court intervention
In some cases, you may be able to petition the court to update the terms of a trust based on unanticipated circumstances.
The methods discussed here may apply to other high-tax states like New Jersey, New York, and Connecticut. It's best to check with a tax professional to ensure your new trust document is legal and will not be flagged for fraud.
The Trust Amendment Audit: Is Your Current Plan a Liability?
A closer look at your current trust plans can reveal whether an amendment is necessary. You may benefit from an amendment if the following is true in your case:
- Transferring assets to a non-grantor trust will reduce your MAGI considerably, allowing you to benefit from increased deductions.
- The non-grantor trust's compressed taxes won't be higher than the tax savings.
- Changing an Intentionally Defective Grantor Trust (IDGT) to a non-grantor trust will successfully create an additional SALT stack.
- You will save enough money in proportion to the amount of work necessary to review and restructure your trusts.
- You do not mind revisiting your plans at the end of 2029 when the SALT deductions revert to a maximum of $10,000.
For taxpayers whose goal is to distribute generational wealth and manage taxes efficiently, trust amendments are the best option in 2026.
Who does not need a trust amendment to leverage the OBBBA regulation?
You do not need a trust amendment if your trust set-up is already benefiting from the temporary OBBBA rules. If you already set up a type of irrevocable trust that itemizes deductions, changing it may not serve your interests.
Residents of no-income-tax states should consider whether amendments will result in SALT stacking. Still, if local property and sales taxes are high, you can leverage SALT stacking to maximize deductions.
You must plan with 2030 in mind (the year the SALT cap reverts to $10,000). Consider whether it will be beneficial for the trust to keep itemizing with the lower SALT cap or if you would prefer the standard federal SALT deduction.
Key Takeaways:
- In 2025, the OBBBA raised the SALT deduction cap to $40,000, up from $10,000 the previous year.
- The high federal SALT cap keeps rising by 1% annually through 2029.
- High-tax State residents benefit from SALT stacking by placing assets in multiple tax-filing trusts.
- Distributing assets over several tax-paying entities prevents AGI phase-outs from nullifying the higher deductions.
The One Big Beautiful Bill Act (OBBBA) presents taxpayers with the opportunity to stack SALT deductions, making it possible to save thousands of dollars. High-tax state residents can now itemize more deductions, in effect avoiding "double taxation".
The new law increased the state and local tax (SALT) deduction cap from $10,000 to $40,400 (in 2026) for taxpayers who itemize. This new cap is much higher than the standard federal SALT deduction ($16,100 for single filers), making itemizing more appealing.
Placing assets in non-grantor trusts spreads the deductions over several entities. However, the trust must report its own income and itemize on Form 1041.
High-net-worth taxpayers in high-tax states can especially benefit from amending existing trusts to avoid phasing out the higher deduction cap.
This article explains how to benefit from the revised tax deductions from 2026 through 2029.
How To Use Trusts to Manage Tax Obligations
Trusts are common estate planning tools that allow grantors to set aside gifts and inheritance for their loved ones. If you maintain control of the assets in a trust, the trust's tax obligations are reported on your income.
However, you can use a non-grantor trust that files its own taxes and manages its own liabilities. You will lose control over the assets within the trust, but proper planning ensures that the arrangement serves your best interest.
Irrevocable non-grantor trusts can itemize and thus claim the increased tax deductions. Distributing the high-cap deductions over several entities saves you money by reducing taxable income.
Careful planning is necessary when using or amending trusts for tax management because the IRS scrutinizes them for misuse and tax evasion. Additionally, inadequate planning can result in multiple trusts being treated as a single trust (IRC section 643(f)).
What is SALT stacking?
In 2025, the OBBBA temporarily raised the federal SALT cap to 40,000 from $10,000. That cap has since increased to 40,400 in 2026 and will keep increasing by 1% annually through 2029.
Although the new cap is considerably higher than $10,000, high-tax state residents still end up with expensive tax obligations that can run into hundreds of thousands of dollars.
SALT stacking is a tax-planning strategy that circumvents the $40,400 federal SALT cap. It involves placing assets in multiple taxable trusts that itemize deductions. These multiple deductions add up to exceed the cap for personal or joint returns.
SALT cap limits and AGI phase-outs to watch out for
As mentioned, the $40,400 SALT cap is temporary. It will rise by 1% each year until 2029, but afterward revert to the regular $10,000. This fact makes the 2026-2029 window a critical time to leverage the higher deductions.
Remember that if your income exceeds half a million dollars, the higher SALT cap starts to phase out, although it cannot drop below the $10,000.
The table below highlights the rising SALT cap for the next five years.
| Year | New SALT Deduction Cap Limit | New AGI Phase-Out Limit |
|---|---|---|
| 2025 | $40,000 | $500,000 |
| 2026 | $40,400 | $505,000 |
| 2027 | $40,804 | $510,050 |
| 2028 | $41,212 | $515,151 |
| 2029 | $41,624 | $520,303 |
| 2030 | $10,000 | - |
The last column shows the Modified Adjusted Gross Income (MAGI) amount at which your SALT deductions begin to reduce by 30 cents for every dollar over the limit. In 2026, a $606,333 AGI phases out the 40,400, meaning your SALT deductions go back to the minimum of $10,000.
How to Amend Trusts to Benefit from the 2026 SALT Stacking in California
Existing trusts with unfavorable terms can be amended to benefit from SALT stacking from 2026 through 2029. You may need to work with a tax professional to ensure your amendments are not only legal but also financially sound.
The goal is to have assets in trusts that can itemize and claim more SALT deductions. Irrevocable non-grantor trusts function best in these circumstances.
You can amend trusts using the following methods.
From grantor to non-grantor trust decanting
Decanting involves moving assets from an existing trust to a new one with improved terms. In this case, you would be creating a new irrevocable trust, a separate entity that reports taxes on its income.
This move may improve tax efficiency in high-tax states such as California, New York, and New Jersey. Trust decanting must follow local and federal laws. The California Uniform Trust Decanting Act (Probate Code §§ 19501 et seq.) requires a 60-day notice to all concerned parties before making the switch.
Before decanting into a non-grantor trust, consider whether you are willing to relinquish all or most control over the assets.
Modification by consent
State laws may allow you to modify the terms of a trust to leverage the new SALT stacking. California Probate Code 15404(a) states that a trust can be modified if the grantor and all beneficiaries consent in writing.
Use a trust protector
A trust protector may be able to amend the trust's provisions to make the terms more favorable without court involvement. However, the current trust document must have named the trust protector and granted them such authority.
Court intervention
In some cases, you may be able to petition the court to update the terms of a trust based on unanticipated circumstances.
The methods discussed here may apply to other high-tax states like New Jersey, New York, and Connecticut. It's best to check with a tax professional to ensure your new trust document is legal and will not be flagged for fraud.
The Trust Amendment Audit: Is Your Current Plan a Liability?
A closer look at your current trust plans can reveal whether an amendment is necessary. You may benefit from an amendment if the following is true in your case:
- Transferring assets to a non-grantor trust will reduce your MAGI considerably, allowing you to benefit from increased deductions.
- The non-grantor trust's compressed taxes won't be higher than the tax savings.
- Changing an Intentionally Defective Grantor Trust (IDGT) to a non-grantor trust will successfully create an additional SALT stack.
- You will save enough money in proportion to the amount of work necessary to review and restructure your trusts.
- You do not mind revisiting your plans at the end of 2029 when the SALT deductions revert to a maximum of $10,000.
For taxpayers whose goal is to distribute generational wealth and manage taxes efficiently, trust amendments are the best option in 2026.
Who does not need a trust amendment to leverage the OBBBA regulation?
You do not need a trust amendment if your trust set-up is already benefiting from the temporary OBBBA rules. If you already set up a type of irrevocable trust that itemizes deductions, changing it may not serve your interests.
Residents of no-income-tax states should consider whether amendments will result in SALT stacking. Still, if local property and sales taxes are high, you can leverage SALT stacking to maximize deductions.
You must plan with 2030 in mind (the year the SALT cap reverts to $10,000). Consider whether it will be beneficial for the trust to keep itemizing with the lower SALT cap or if you would prefer the standard federal SALT deduction.
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