For the 2026 tax year, the SALT deduction cap is $40,400 for most filers, up from the $10,000 ceiling that applied from 2018 through 2024. The higher cap comes from the One Big Beautiful Bill Act, signed on July 4, 2025, and it stays in place (with a 1% annual bump) through 2029 before dropping back to $10,000 in 2030.1U.S. Congress. H.R.1 – 119th Congress (2025-2026) The headline number is not the whole story, though. The cap phases down at higher incomes, splits in half for separate filers, and only helps you if you itemize.
What Counts Toward the $40,400
The cap applies to the combined total of your qualifying state and local tax payments, not a separate limit for each type. Three categories count: state and local income taxes (or general sales taxes, but not both), real estate taxes on property you own, and the value-based portion of personal property taxes on items like vehicles and boats.2Internal Revenue Service. Topic No. 503, Deductible Taxes
Most filers in states with an income tax choose income taxes over sales taxes because the number is larger. Residents of states without an income tax (Texas and Florida among them) generally take the sales tax option. Foreign income taxes sit outside the SALT cap entirely and are handled separately, either as a deduction or a foreign tax credit; foreign real property taxes are not deductible at all.3Office of the Law Revision Counsel. 26 USC 164 – Taxes
If you paid $25,000 in state income tax and $18,000 in property tax, your $43,000 total gets trimmed to $40,400. The excess is lost.
The Income Phaseout That Shrinks the Cap
The $40,400 figure only applies in full if your modified adjusted gross income stays below $505,000 for 2026 ($252,500 if you file separately). Above that line, the cap phases down. The reduction continues until it bottoms out at $10,000 for filers with income above roughly $606,000.
The practical effect: the raised cap primarily benefits middle- and upper-middle-income households. The highest earners remain close to the old $10,000 limit, even though they typically pay the most in state and local taxes.
Married Filing Separately
The statute sets the separate-filer cap at exactly half the applicable limitation. For 2026, that means $20,200 per spouse.3Office of the Law Revision Counsel. 26 USC 164 – Taxes The phaseout threshold also halves, beginning at $252,500 of modified adjusted gross income rather than $505,000.
The Cap Only Matters if You Itemize
SALT is claimed on Schedule A. It only saves you money if your total itemized deductions beat the standard deduction for your filing status.4Internal Revenue Service. About Schedule A (Form 1040), Itemized Deductions For 2026, the standard deduction is:
- Married filing jointly: $32,200
- Single: $16,100
- Married filing separately: $16,100
- Head of household: $24,150
Those figures reflect the IRS inflation adjustments incorporating the permanent extension of the higher standard deduction under the One Big Beautiful Bill Act.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
With the cap raised, more people will find itemizing worthwhile. A homeowner paying $20,000 in property tax and $15,000 in state income tax already has $35,000 in SALT before mortgage interest or charitable contributions enter the calculation. Under the old $10,000 ceiling, that same person often couldn’t clear the standard deduction at all.
The Pass-Through Entity Workaround
If you own a partnership, S-corporation, or LLC taxed as either, you may have a route around the personal cap. Roughly 36 states now let pass-through entities elect to pay state income tax at the entity level instead of passing the full liability through to owners.6Internal Revenue Service. Notice 2020-75 – Deductibility of Payments by Partnerships and S Corporations for State and Local Income Taxes
In Notice 2020-75, the IRS confirmed that these entity-level payments are deductible as business expenses. That reduces the income flowing through on K-1s, and because the business paid the tax, it never counts against the owner’s personal $40,400 cap.7Internal Revenue Service. N-2020-75 – IRS Provides Certainty Regarding the Deductibility of Payments by Partnerships and S Corporations for State and Local Income Taxes
Consider an S-corp owner with $500,000 in pass-through income in a state with a 9% income tax rate. That’s $45,000 in state tax. On a personal return, roughly $4,600 exceeds the cap and disappears. With the entity-level election, the full $45,000 reduces business income before anything reaches the owner. Deadlines vary by state, and some require the election before the tax year even starts, so check your state’s rules early.
The AMT Wipes Out SALT Entirely
One boundary that catches high earners: the alternative minimum tax disallows SALT deductions completely. If you owe AMT, your state and local tax payments give you zero federal benefit no matter what the cap says.
For 2026, the AMT exemption is $90,100 for single filers (phaseout starting at $500,000) and $140,200 for married filing jointly (phaseout starting at $1,000,000).5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Below those thresholds, AMT is unlikely and the SALT deduction works as expected. Inside the phaseout range or above, run the numbers both ways. The same taxpayers who gain the most from the raised cap are often the ones most likely to lose it to AMT.
What Payments Don’t Count
Not every check you write to a local government reduces your SALT total. Transfer taxes on real estate sales are specifically non-deductible on Schedule A.2Internal Revenue Service. Topic No. 503, Deductible Taxes Fees for trash pickup, water and sewer, sidewalks, or other specific services are not taxes. HOA dues and special assessments are personal expenses. Fines and penalties never qualify.
If your annual property tax bill lumps assessments and service charges in with the tax itself, ask your assessor’s office for a breakdown before you total your SALT figure.
What Happens After 2029
The cap increases by 1% each year through 2029, then the law resets it to $10,000 in 2030.3Office of the Law Revision Counsel. 26 USC 164 – Taxes Unless Congress acts again, the higher ceiling is a five-year window. For anyone deciding whether to accelerate a property tax payment, sell a home, or restructure a business’s state tax approach, the 2029 boundary is worth keeping on the calendar.