The state and local tax (SALT) deduction lets itemizers write off state income taxes (or sales taxes), local income taxes, and property taxes. Since 2018 it has been capped, and the cap has been one of the most litigated, most political lines on the return. The 2025 law (OBBBA) temporarily raised that cap, and 2026 is the second year of the higher limit — but the relief is neither permanent nor available to everyone. (Bipartisan Policy Center)
The 2026 cap
- SALT deduction cap for 2026: $40,400 (most filing statuses)
- Married filing separately: $20,200
- The cap creeps up about 1% a year: $40,000 (2025), $40,400 (2026), $40,804 (2027), $41,212 (2028), $41,624 (2029)
These are the numbers for itemizers. If you take the standard deduction, none of this applies — the SALT cap only matters once your itemized deductions clear the standard amount. (Bipartisan Policy Center)
The high-income phase-down
The higher cap is not for everyone. If modified AGI runs above a threshold, the cap shrinks: (Bipartisan Policy Center)
- 2026 threshold: $505,000 (single and joint); $252,500 for married filing separately
- The cap drops by 30 cents for every dollar of MAGI above the threshold
- It can never fall below $10,000 ($5,000 if MFS)
So only taxpayers with MAGI between roughly $505,000 and $672,000 see a partial reduction; above that, the cap simply sits at the $10,000 floor. This is the detail that catches high earners who assumed the $40,400 figure was theirs — for them it is not. (Bipartisan Policy Center)
The 2030 cliff
This part is temporary by design. Starting with the 2030 tax year the cap snaps back to $10,000 ($5,000 MFS), and the phase-down disappears. Congress could extend it, but as written, the relief expires. Households in high-tax states that are itemizing should treat the 2025–2029 window as the window, not the new normal. (Bipartisan Policy Center)
Numbers: a $530,000 MAGI joint filer
A married couple with $530,000 MAGI and $38,000 of eligible SALT in 2026:
- MAGI is $25,000 over the $505,000 threshold
- Reduction: 30% × $25,000 = $7,500
- Usable SALT cap: $40,400 − $7,500 = $32,900
- They deduct $32,900 of their $38,000 in state and local taxes; the remaining $5,100 is simply lost
For filers under the threshold, by contrast, the full $38,000 would be deductible. That gap is the whole reason the phase-down matters. (Bipartisan Policy Center)
What actually counts as SALT
SALT is one combined deduction for state and local taxes. It covers:
- State and local income taxes (or sales taxes, if you elect that route instead)
- Real property taxes on a home, vacation property, or land
- Personal property taxes on vehicles or business equipment
All of those share the single cap. You cannot split them across separate limits — the total is what the cap binds. If you live in a state with no income tax but high property taxes, the property taxes still eat the same cap as everyone else's income taxes would. (Bipartisan Policy Center)
The income-tax-or-sales-tax choice
If you pay little state income tax but a lot of local sales tax (a large one-time purchase, for instance), you may elect to deduct sales tax instead of income tax. The IRS publishes optional sales-tax tables to make that easier. Most filers stay with income tax because it tracks actual payments and is simpler to document, but the election is worth a look for a high-sales-tax year. (Bipartisan Policy Center)
Bunching strategy for itemizers
A classic move is "bunching": push two years of deductible expenses into one year so you clear the standard-deduction threshold and itemize that year, then take the standard deduction the next. With the higher SALT cap, bunching matters less than it did under the old $10,000 limit, but it still helps households near the cap — paying next year's property tax in December, for example, can pull an extra few thousand dollars of SALT into the current year. The SALT cap also sits alongside other itemized limits (medical expenses must exceed 7.5% of AGI; charitable gifts have AGI percentage caps), so the whole Schedule A picture, not just SALT, decides whether itemizing is worth it. The state income tax estimator will show you how your state liability feeds the SALT deduction on the federal return. (Bipartisan Policy Center)
The cap in practice
The $10,000 cap is the single most important number in the SALT deduction. A household that pays $30,000 in state income tax and $15,000 in property tax has $45,000 of SALT expenses, but can only deduct $10,000. The remaining $35,000 is a tax cost that the federal return does not recognize, which is why the cap is the dealbreaker for many high-property-tax households. The cap applies to the sum of state and local income or sales tax plus property tax, not to each category separately, so a household in a no-income-tax state can use more of its property tax against the cap than a household in a high-income-tax state can. (Bipartisan Policy Center)
Why the cap matters more than the rate
A rate cut in your state changes the income you earn after tax, but it does not change the SALT cap, which is a fixed federal number. For a household already at the cap, a state rate cut saves income tax but does not increase the federal deduction, because the deduction is already maxed out. This makes the cap the binding constraint for most high-SALT households, and it is the number to model before you decide whether a state move or a tax planning move is worth the effort. (Bipartisan Policy Center)
Planning around the cap
A few moves can improve the position of a household already at the cap. Paying down a mortgage with a large remaining balance in a year where you will not otherwise owe federal income tax can use the interest deduction in a low-bracket year. Accelerating a large property tax bill into a year where you expect a temporary dip in income can raise the itemized total just enough to clear the standard deduction. And in a year where the estate tax exemption is at a high level, a large gift can remove assets from the estate before the cap is reached, which trades a current itemized deduction for a future estate tax saving. (Internal Revenue Service)
Disclaimer: This article is general educational information, not tax, legal, or investment advice. Dollar amounts come from the 2026 sources listed at the end of this article and may change. Before you act, talk to a licensed CPA, EA, or tax attorney about your own situation.