The SALT Torpedo and Charitable Giving
How the SALT cap phase-out creates counterintuitive incentives for donors
Key Finding
A person earning $700,000 pays $1,930 more (after tax savings) for a $10,000 donation than someone earning $300,000. The SALT cap phase-out pushes high earners to the standard deduction, reducing their charitable giving incentive.
Net Cost of a $10,000 Donation
View Full ChartSALT Deduction Cap by Income
View Full ChartEffective Giving Incentive Rate
View Full ChartTax Savings from $10,000 Donation
View Full ChartWhy This Happens
The One Big Beautiful Bill Act (OBBBA) raised the SALT deduction cap from $10,000 to $40,000 for 2025, but this higher cap phases out for high earners:
| Income | SALT Cap |
|---|---|
| Below $500,000 | $40,000 |
| $500,000 - $600,000 | Phase-out (30% per $10k excess) |
| Above $600,000 | $10,000 (floor) |
The Mechanism
- $300k earner: SALT cap is high enough to make itemizing worthwhile. Full $10k donation adds to itemized deductions → 35% tax savings.
- $700k earner: SALT cap phases down to $10k, making standard deduction ($15,750) better. Donating $10k switches them to itemizing, but they only gain $4,250 in extra deductions ($20k itemized vs $15,750 standard) → 16% effective rate.