The SALT Deduction Cap in 2026

The deduction for state and local taxes, known as SALT, was limited to $10,000 from 2018 through 2024. Congress raised that cap in 2025, and for 2026 it is $40,400 for most filers. The change moves some households from the standard deduction back to itemizing, particularly homeowners in high-tax states. This guide explains how the cap works, who is affected by the phase-down and what to consider before December 31. Use the deduction calculator to see what the cap does to your numbers. It is general information, not tax advice.

What the cap covers

The SALT deduction includes, as part of itemized deductions on Schedule A:

• State and local income taxes withheld or paid, or state and local general sales taxes (you choose one, not both).
• State and local real estate taxes on property you own.
• Personal property taxes based on value, such as some vehicle registration fees.

Foreign real property taxes are not deductible, nor are special assessments for improvements, water or sewer charges, or homeowner association fees. The cap applies to the total of all these items.

The 2026 numbers

For 2025 the cap was $40,000. The law raises it by 1% each year through 2029, to $40,400 in 2026. In the current law schedule, the cap then returns to $10,000 in 2030, though Congress could act again. The cap is reduced for higher earners: it is lowered by 30% of the amount by which modified adjusted gross income (MAGI) exceeds a threshold, which is $505,000 for 2026, but never below $10,000. Married individuals filing separately have half of each figure: $20,200 and a $252,500 threshold, with a floor of $5,000.

Here is an example. A couple filing jointly with $555,000 of MAGI is $50,000 over the threshold, so the cap falls by $15,000 to $25,400. A couple with $606,333 or more of MAGI is back to the $10,000 floor.

Who benefits

Households whose state and local taxes were between $10,000 and about $40,000 gain the most. Under the earlier $10,000 cap, many people took the standard deduction; now a family paying $14,000 of property tax and $9,000 of state income tax can deduct $23,000, which with mortgage interest and charity may exceed the $32,200 joint standard deduction. People in states with no income tax and modest property taxes will probably continue to take the standard deduction.

Income tax or sales tax?

You can choose whichever gives the larger deduction. State income tax is usually larger for wage earners, but sales tax may win if you live in a state with no income tax, or if you made a large purchase such as a vehicle or boat. The IRS provides a sales tax calculator and tables in the Schedule A instructions. If you choose sales tax, you can use either actual receipts or the IRS tables, plus tax on certain large purchases.

Timing and prepayment

Since the cap is now higher, timing tricks may matter again, but they have limits:

• Property taxes: You can deduct taxes in the year you pay them, but only if the tax has been assessed. Paying next year’s bill in advance in December is typically not deductible unless it has already been assessed and is due. Your local tax office can tell you.
• Final state estimated payment: If you make quarterly state payments, a payment made by December 31 counts for 2026, while one made in January is deducted next year. Do not pay more than you owe just to speed up the deduction; the IRS can disallow a payment that is not a true tax liability.
• Withholding: State withholding on your last paycheck counts in the year paid.
• State refunds: If you itemized last year and got a state refund, part of it may be taxable income this year.

Moving deductions into a year when you will itemize and out of a year when you will not is the logic behind bunching, covered in the charitable giving guide.

Pass-through entity taxes

Many states let partnerships and S corporations pay state income tax at the entity level, which is deductible by the entity and is not subject to the individual SALT cap. The 2025 law did not eliminate these elections, and the IRS permitted them in Notice 2020-75. If you own part of a business, ask your accountant whether your state has such a regime and whether you have to make an election or payment before year-end, because deadlines vary.

Interaction with the alternative minimum tax

State and local taxes are not deductible for the alternative minimum tax (AMT), so for people subject to AMT a larger SALT deduction may not reduce tax as much as expected. Higher exemption amounts mean fewer taxpayers owe AMT, but those with large incomes, large capital gains or incentive stock options should check.

Common questions about what counts

• Escrow payments. If your mortgage servicer pays your property tax from escrow, you deduct the amount the servicer actually paid to the taxing authority in 2026, which appears on Form 1098 or your annual escrow statement, not the amount you sent into escrow.
• Vehicle fees. Only the part of a registration fee based on the value of the car is deductible, and only if it is charged annually.
• Home purchases and sales. Property taxes are divided between buyer and seller by the days each owned the home, and the settlement statement shows each share.
• Rental property. Taxes on a rental are deducted on Schedule E against the rental income and are not subject to the SALT cap, which is a reason to keep personal and rental taxes separate.
• Business taxes. State taxes paid by a sole proprietor on business income are generally treated as personal state income taxes and are subject to the cap.

Using the calculator

Enter your estimated state income tax, property tax and other itemized items into our calculator. It applies the 2026 cap, the phase-down for high incomes, the medical floor and the new charity floor, and compares the total to the standard deduction. If the result is close, try changing the items you can control, such as the timing of a charitable gift or an estimated payment.

A short action list

1. Gather your latest property tax bill and state tax withholding total.
2. Estimate your MAGI to see if the phase-down applies.
3. Check whether you would itemize with the cap at $40,400.
4. If you are near the line, consider paying an assessed property tax bill or state estimate in December.
5. If you own a pass-through business, ask about the state entity-level tax.

Tax rules for state taxes vary widely, and this guide describes only the federal deduction. Always consult a tax professional about your state.