What is the SALT cap for 2026?

The SALT deduction cap for 2026 is $40,400 for most filers and $20,200 for married individuals filing separately. The One Big Beautiful Bill Act raised the cap from $10,000 to $40,000 for tax years 2025–2029, with a 1% annual inflation adjustment — so 2026 gets the first bump. In 2030 the cap reverts to $10,000 unless Congress extends it.

Do I have to itemize to claim the SALT deduction?

Yes — the SALT deduction is only available if you itemize on Schedule A of Form 1040. It only saves you money when your total itemized deductions (SALT, mortgage interest, charitable gifts, qualifying medical costs) exceed your standard deduction. For 2026 the standard deduction is $16,100 for single filers and $32,200 for joint filers. If your itemized total falls below that, take the standard deduction instead.

Does the higher SALT cap phase out at high incomes?

Yes. The $40,400 cap is reduced by 30% of the amount by which your modified adjusted gross income (MAGI) exceeds about $505,000 for 2026 ($250,000–$252,500 if married filing separately). The phaseout has a floor: the deduction never drops below $10,000 ($5,000 for separate filers). At roughly $600,000 of MAGI the benefit phases all the way back to the old $10,000 limit.

How does married filing separately affect the SALT deduction?

Married filing separately halves everything: the 2026 cap is $20,200 instead of $40,400, and the phaseout threshold is $252,500 instead of $505,000. You still must itemize to claim it. One additional trap: if one spouse itemizes, the other must itemize too — neither can take the standard deduction.

What is the PTET workaround, and is it still allowed?

A PTET (pass-through entity tax) election lets S corporations and partnerships pay state income tax at the entity level, where it counts as a business deduction and the SALT cap never applies. It is based on IRS Notice 2020-75, most states now offer the election, and the One Big Beautiful Bill Act left it fully intact — an earlier House proposal to restrict it for service businesses was dropped.

Taxes

SALT Deductions Tax: The 2026 Rules After the $40k Cap

For eight years, the SALT deduction tax rules capped your state and local tax deduction at $10,000 — no matter what you actually paid. The One Big Beautiful Bill Act blew that ceiling open: for tax year 2026, the cap is $40,400, with a phaseout for high earners and a sunset back to $10,000 in 2030. Here is what counts, who benefits, and how to decide whether itemizing finally makes sense for you.

MKD Editorial Team October 19, 2026 6 min read Figures checked 19 Oct 2026

Flat fintech illustration in deep teal and gold on pale cream: a deep teal tax folder with a gold binder clip beside a deep teal calculator with gold buttons, stacks of gold coins and small geometric shapes, on a pale cream background, no text. — The $40,400 question: how much of your state and local taxes can you deduct in 2026.

Key takeaways

2026 SALT cap: $40,400 ($20,200 if married filing separately) — up from the $10,000 ceiling that applied from 2018 through 2024.
It is temporary: the cap rises 1% a year through 2029, then reverts to $10,000 in 2030 unless Congress acts.
High earners phase out: the cap shrinks by 30 cents for every dollar of MAGI above about $505,000 in 2026, but never below $10,000.
You must itemize on Schedule A — the deduction only helps if your itemized total beats the 2026 standard deduction ($16,100 single / $32,200 joint).
Business owners can still use pass-through entity tax (PTET) elections in most states to dodge the cap entirely.

What is the SALT deduction?

SALT stands for state and local taxes. The deduction lets you subtract qualifying state and local taxes from your federal taxable income — only for taxes you paid, up to the cap. It covers two buckets: state and local property taxes (real estate and personal property), plus either your state and local income taxes or your state and local general sales taxes — whichever is higher. Foreign real property taxes are excluded, and excise taxes like gas or registration fees do not count (SmartAsset’s SALT guide).

Before 2018 there was no cap at all; the Tax Cuts and Jobs Act imposed the $10,000 ceiling ($5,000 for married filing separately). The One Big Beautiful Bill Act, signed July 4, 2025, is the first real relief since then.

The new cap: $40,400 for 2026 (and what comes next)

For tax years 2025 through 2029, the cap is $40,000, adjusted upward by 1% each year for 2026 through 2029. The year-by-year schedule:

2025: $40,000
2026: $40,400
2027: $40,804
2028: $41,212
2029: $41,624
2030: reverts to $10,000 unless Congress extends it

Married individuals filing separately get exactly half: $20,000 for 2025, $20,200 for 2026 (Serving Those Who Serve).

Flat fintech illustration in deep teal and gold on pale cream: a deep teal house with a gold roof beside a rising gold bar chart and deep teal coins, on a pale cream background, no text. — High property taxes plus high state income tax are finally deductible in the same year — up to the 2026 cap.

The income phaseout: who loses the higher cap

The bigger cap comes with a catch. If your modified adjusted gross income (MAGI) exceeds $500,000 ($250,000 if married filing separately), the cap is reduced by 30% of the excess. That threshold also rises 1% a year, so for 2026 it is about $505,000. Crucially, the deduction never falls below $10,000 ($5,000 for separate filers) — high earners simply end up back at the old limit (Wessel & Company).

The math: a couple with $550,000 MAGI in 2026 is $45,000 over the threshold. Thirty percent of that is $13,500, so their cap is $40,400 minus $13,500 = $26,900. At $600,000 MAGI, the reduction wipes out the whole increase and they are stuck at the $10,000 floor. If you are hovering near the line, income timing matters — accelerating or deferring bonuses, Roth conversions, or option exercises across tax years can change how much of the cap you keep.

Do you have to itemize to claim it?

Yes. SALT is an itemized deduction, claimed on Schedule A of Form 1040. It only saves you money if your total itemized deductions — SALT plus mortgage interest, charitable gifts, qualifying medical costs, and the rest — exceed your standard deduction. For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly ($24,150 for head of household), per the IRS (Rev. Proc. 2025-32, IR-2025-103) and the Tax Foundation’s 2026 parameters.

This is the decision the new cap changes for a lot of households. A family paying $20,000 in state income tax and $14,000 in property tax has $34,000 of SALT alone — under the old rules, only $10,000 counted and itemizing rarely beat the standard deduction. In 2026, the full $34,000 counts against the $40,400 cap, and itemizing is suddenly very much in play.

The PTET workaround for business owners

If you own an S corporation or partnership, there is a route around the cap. Under IRS Notice 2020-75, when a state imposes its income tax directly on the pass-through entity and the entity pays it, the payment counts as a business deduction at the entity level — not an individual itemized deduction — so the SALT cap never applies. The owners then get a corresponding state tax credit. Most states now offer this election, and the final law left it intact (LegalClarity’s itemized-deduction caps guide). Confirm with your CPA that your state’s election covers the tax year before year-end.

Bottom line

The SALT deduction tax rules for 2026 are the most generous since 2017: a $40,400 cap, a phaseout instead of a cliff, and a five-year window ending in 2030. If you live in a high-tax state and itemize — or were close to itemizing under the old rules — this is the year to rerun the math and talk to a tax pro about timing income around the $505,000 phaseout threshold.

Property tax is the other half of the housing equation

Run your full monthly payment — principal, interest, taxes, and insurance — before you decide whether itemizing pays.

Try the mortgage calculator

Sources & further reading

IRS Newsroom — IRS Releases Tax Inflation Adjustments for Tax Year 2026 (IR-2025-103)Rev. Proc. 2025-32: 2026 standard deduction figures — irs.gov, curl 200, 19 Oct 2026.
Tax Foundation — Individual Taxes: 2026 Guide2026 standard deduction $16,100 single / $32,200 joint — curl 200, 19 Oct 2026.
SmartAsset — SALT Write-Offs: Trump Tax Changes and Requirements$40,000→$40,400 cap, 30% MAGI phaseout, qualifying taxes — curl 200, 19 Oct 2026.
Serving Those Who Serve — SALT Deduction Changes: How the $40,000 Cap Impacts High-Income FedsYear-by-year cap/phaseout table 2025–2030 — curl 200, 19 Oct 2026.
Wessel & Company — Enhanced SALT Tax Break Will Help Many Homeowners$40,400 for 2026, reverts to $10,000 in 2030, PTET untouched — curl 200, 19 Oct 2026.
LegalClarity — Is There a Limit to Itemized Deductions? Caps by TypePTET workaround under IRS Notice 2020-75 — curl 200, 19 Oct 2026.