SALT Deduction Cap 2026

What Changed: $10,000 → $40,400

The SALT deduction lets itemizers deduct state and local income taxes (or sales tax, your choice), property taxes, and some other local levies. Since the 2017 tax law, it was capped at $10,000 for everyone. The One Big Beautiful Bill Act (2025) raised the cap to $40,000 for 2025, indexed for inflation — so for tax year 2026 the cap is $40,400 for single and married-filing-jointly filers, and $20,200 for married-filing-separately. The higher cap runs through 2029, after which it is set to revert to $10,000 unless extended.

The practical effect: a homeowner who pays $9,000 in property tax and $11,000 in state income tax was limited to $10,000 of deduction before. In 2026, that same person deducts all $20,000 of SALT — twice as much.

Who Actually Benefits

The people who gain the most are homeowners in high-tax states — California, New York, New Jersey, Connecticut, Massachusetts, Illinois, and similar — where combined state income tax and property tax routinely blow past the old $10,000 cap. Renters in low-tax states with no state income tax (Texas, Florida, Washington) gain nothing, because their SALT is already below any cap.

• High state income tax — the biggest single SALT item for most workers.
• Property tax — the second piece; high in the Northeast, Midwest, and coastal metros.
• Local wage or city taxes — New York City's city tax, Pennsylvania's local earned-income tax, and similar all count toward SALT.

The value scales with your marginal rate. At a 24% federal rate, an extra $20,000 of deductible SALT (beyond the old cap) is worth about $4,800. At a 32% rate, the same amount is worth $6,400.

The Income Phase-Out

The higher cap has a clawback for high earners. The deduction begins to phase out once modified adjusted gross income (MAGI) passes roughly $505,000 for single and joint filers (the $500,000 threshold indexed for inflation), shrinking on a sliding scale until it returns to the old $10,000 floor for the very highest incomes. Married-filing-separately filers phase out at about half that threshold. If your household MAGI is well above half a million, the practical cap you face is closer to $10,000.

SALT Only Helps If You Itemize

This is the detail that trips people up: the SALT deduction lives on Schedule A, which you only use if your total itemized deductions beat the 2026 standard deduction of $16,100 (single) or $32,200 (joint). A higher SALT cap does not help a filer whose mortgage interest is small and whose SALT is modest — the standard deduction still wins. The cap raise matters only when it pushes total itemized deductions above that threshold.

A high-tax-state homeowner almost always clears the bar now: state income tax plus property tax alone can exceed $16,100, before counting a dollar of mortgage interest.

A Worked Example

Consider a single California homeowner earning $150,000, with about $9,900 of California state income tax, $8,000 of property tax, and $15,000 of mortgage interest — roughly $32,900 of itemized deductions (illustrative property and interest figures):

Itemizing adds $16,800 of deduction over the standard deduction. At a 24% federal marginal rate, that is about $4,032 in federal tax saved — almost all of it driven by the SALT cap increase. Under the old $10,000 cap, SALT alone would have been capped, cutting roughly $7,900 out of the itemized total and shrinking the advantage.

Frequently Asked Questions