This is from the IRS Form 8960 instructions. It seems that if you do not itemize your deductions, then there is no adjustment for state income taxes whether it is $10,000 SALT cap of above. However if you are itemizing deductions, your SALT cap is $10,000 and it cannot be more than the SALT cap; however TurboTax uses the state and local income tax amount on Schedule A regardless of the SALP cap..
Deductions subject to AGI limitations under section 67 or section 68.
Any deduction allowed against net investment income that, for purposes of computing your regular income tax, is subject to either the 2% floor on miscellaneous itemized deductions (section 67) or the overall limitation on itemized deductions (section 68) is allowed in determining net investment income, but only to the extent the items are deductible after application of both limitations.
On my TurboTax returns (mainly family), if I was using the standard deduction, TurboTax ignores the state income deduction on Form 8960. If I was using itemized deductions, TurboTax used the following calculation: (Form 8960 Line 8 Net Investment Income/AGI) x Schedule A Line 5a. Hope this helps!
