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The SALT deduction cap is $40,400 for 2026, up from the old $10,000 limit. The One Big Beautiful Bill Act raised the cap on the state and local tax deduction, a big change for itemizers in high-tax states. The higher cap is temporary, runs through 2029, and phases back down to $10,000 for very high earners and again for everyone in 2030. It only helps if you itemize, which most people still do not. Here is how the new cap works and whether it changes your math. Because tax situations vary, confirm the details with a tax professional.
Key Takeaways
- The SALT deduction cap is $40,400 for 2026, up from $10,000, and rises about 1% a year through 2029.
- It only benefits taxpayers who itemize, mainly homeowners in high-tax states.
- The higher cap phases down for incomes above $500,000, reaching the $10,000 floor by about $600,000.
- In 2030 the cap reverts to $10,000 for everyone ($5,000 married filing separately) unless extended.
- About 90% of filers take the standard deduction, so the change does not affect most people.
What is the SALT deduction?
SALT stands for state and local taxes. The SALT deduction lets you deduct certain taxes you pay to state and local governments from your federal taxable income, but only if you itemize instead of taking the standard deduction. It covers two main categories: state and local income taxes (or sales taxes, if you choose that instead) and property taxes on your home and other property.
It is one of several changes in the 2025 tax law. For the full picture, see our complete OBBBA tax changes guide.
How much is the SALT cap for 2026?
For 2026 the SALT deduction is capped at $40,400. The One Big Beautiful Bill Act (OBBBA) raised the cap from $10,000, set it at $40,000 for 2025, and indexed it so it rises about 1% each year through 2029. Then in 2030 it reverts to the old $10,000 limit for all filers, and $5,000 for married filing separately, unless Congress extends it.
| Tax year | SALT cap |
|---|---|
| 2024 and earlier | $10,000 |
| 2025 | $40,000 |
| 2026 | $40,400 |
| 2027 to 2029 | Rises about 1% per year |
| 2030 onward | $10,000 (reverts) |
Who benefits from the higher cap?
The higher cap mainly helps itemizers in high-tax states, where state income and property taxes easily exceeded the old $10,000 limit. A homeowner in New York, New Jersey, or California who pays $25,000 in combined state income and property taxes could deduct only $10,000 before, but can now deduct the full amount, up to $40,400.
It does not help the roughly 90% of filers who take the standard deduction, and it does nothing for renters in low-tax or no-income-tax states whose deductible taxes were already under $10,000. The benefit is concentrated among higher-income homeowners in expensive states.
What is the income phase-out?
The higher cap phases out for high earners. Once your modified adjusted gross income passes $500,000, the cap is reduced by 30% of the amount over that threshold, down to a floor of $10,000. In practice, the extra deduction phases out between roughly $500,000 and $600,000 of income, and above that you are back to the $10,000 cap.
So a household at $550,000 of MAGI is $50,000 over the line, which cuts the cap by $15,000 (30% of $50,000), leaving about $25,400 deductible. By around $600,000, only the $10,000 base cap remains.
Should you itemize now?
The higher cap makes itemizing worth rechecking if you are a homeowner in a high-tax state, but it only pays off if your total itemized deductions beat the standard deduction. For 2026 the standard deduction is $16,100 for single filers and $32,200 for married filing jointly, so your SALT plus mortgage interest, charitable gifts, and other itemized deductions need to clear that bar.
For example, a married couple with $30,000 of SALT and $12,000 of mortgage interest has $42,000 in itemized deductions, well above the $32,200 standard deduction, so itemizing saves them money. A couple with $18,000 of SALT and no mortgage would still be better off taking the standard deduction. Run both ways, or let tax software compare them, before deciding. Our guide to lowering your tax bill covers how to bunch deductions to clear the threshold.
Why was the cap raised, and what was it before?
The $10,000 SALT cap was created by the 2017 Tax Cuts and Jobs Act. Before 2018, there was no dollar limit on the SALT deduction at all. The $10,000 cap hit hardest in high-tax states, where residents felt they were being taxed twice on the same income, and raising it was one of the most debated parts of the 2025 law. The compromise was a temporary increase to roughly $40,000 with an income phase-out, rather than a permanent repeal of the cap.
What about business owners?
Many states let owners of pass-through businesses (S-corporations and partnerships) get around the SALT cap through a pass-through entity tax, where the business pays the state tax and deducts it at the entity level, outside the individual cap. The OBBBA largely preserved these workarounds, so if you own a pass-through business in a state with this option, your effective SALT relief can be larger than the individual cap suggests. The rules are state-specific and complex, so this is a clear case to involve a CPA. Our guide to freelancer and self-employed taxes covers the basics of business deductions.
What taxes count toward the cap?
- State and local income taxes withheld or paid during the year, or state and local sales taxes if you choose that option instead.
- Property taxes on your home, land, and other real estate you own.
- Personal property taxes, such as some vehicle registration fees based on value.
You add these up, and the total deduction is limited to the cap for the year. Federal taxes, and taxes on property used for business or rental (which follow separate rules), do not count toward this personal cap.
FAQ
What is the SALT cap for 2026?
$40,400, up from the old $10,000 limit. It rises about 1% a year through 2029, then reverts to $10,000 in 2030.
Do I have to itemize to use the SALT deduction?
Yes. The SALT deduction is only available if you itemize. If you take the standard deduction, the cap does not affect you.
At what income does the higher cap phase out?
Above $500,000 of MAGI the cap shrinks by 30% of the excess, reaching the $10,000 floor by about $600,000 of income.
Is the higher cap permanent?
No. It runs from 2025 through 2029 and reverts to $10,000 in 2030 unless Congress extends it.
Does the cap apply per person or per return?
Per return. Married couples filing jointly share one cap, and married filing separately each get half ($20,200 for 2026).
Bottom line: The SALT cap is $40,400 for 2026, a major break for itemizers in high-tax states, but it phases out above $500,000 of income and reverts to $10,000 in 2030. It only helps if your itemized deductions beat the standard deduction, so most filers will not see a change.
This article is for educational and informational purposes only and is not tax advice. Tax rules and figures change, and whether itemizing helps depends on your situation. We want you to feel clear, not overwhelmed, so confirm how the SALT cap applies to you with a qualified tax professional, or at irs.gov, before you file.
