For 2026, the state and local tax deduction cap is $40,400 for most filers who itemize, and $20,200 for those married filing separately.1Office of the Law Revision Counsel. 26 USC 164 – Taxes That is roughly four times the $10,000 flat cap that applied from 2018 through 2024. The higher limit came from the One Big Beautiful Bill Act, signed on July 4, 2025, and it phases down for taxpayers with modified adjusted gross income above $505,000. The increase is temporary: the cap reverts to $10,000 starting in tax year 2030.
The Cap Year by Year Through 2029
The new law sets a schedule rather than a single number. Each year’s cap equals 101 percent of the prior year, a 1-percent bump that is not a full inflation adjustment.1Office of the Law Revision Counsel. 26 USC 164 – Taxes
- 2025: $40,000 ($20,000 married filing separately)
- 2026: $40,400 ($20,200 married filing separately)
- 2027: $40,804
- 2028: $41,212
- 2029: $41,624
The cap applies to the combined total of qualifying state and local taxes you claim as itemized deductions on Schedule A. Taxes tied to a trade or business remain fully deductible as business expenses and do not count against the cap.1Office of the Law Revision Counsel. 26 USC 164 – Taxes
Who Loses the Higher Cap: The Income Phasedown
The full $40,400 is only available to households under an income threshold. For 2026, the phasedown starts at $505,000 of modified adjusted gross income, or $252,500 for married filing separately. Above that point, the cap drops by 30 cents for every additional dollar of income until it hits a floor of $10,000 ($5,000 for married filing separately).1Office of the Law Revision Counsel. 26 USC 164 – Taxes
The math works out this way: a single filer or married couple filing jointly with modified AGI of roughly $606,333 or more in 2026 gets no benefit from the increase at all. Their deduction is capped at the same $10,000 that applied under the old rules. The income threshold also rises 1 percent per year through 2029.
The biggest winners are upper-middle-income households in high-tax states. If you earn under about $500,000 and pay significant state income and property taxes, you can now deduct up to four times what was previously allowed. Very high earners see little change. Lower-income households generally don’t pay enough in state and local taxes to itemize at all.
Which Taxes Count Toward the Cap
Three categories of state and local taxes qualify, and you combine them into one total that is subject to the cap:
- State and local income taxes, or general sales taxes. You pick one or the other each year, whichever produces a larger deduction.
- Real property taxes on your home or other real estate, based on the property’s value.
- Personal property taxes on items like cars or boats, but only the portion calculated from the asset’s value and imposed annually.2Internal Revenue Service. Topic No. 503, Deductible Taxes
Income Tax or Sales Tax, Not Both
You cannot claim state income tax and general sales tax in the same year. For the sales tax route, you either add up receipts or use the IRS optional sales tax tables, which estimate a figure based on your income, family size, and local rates. Big-ticket purchases like a car or major appliance can be added on top of the table amount, because the tables exclude those to avoid double-counting.3Internal Revenue Service. Use the Sales Tax Deduction Calculator
For most people in states with an income tax, the income tax figure wins. The sales tax election mainly benefits residents of states without an income tax, such as Florida, Texas, and Washington.
What Counts as a Personal Property Tax
Not every line on a vehicle registration bill qualifies. Only the portion calculated from the vehicle’s value is deductible. Flat registration fees, weight-based fees, and title transfer charges do not count. If your bill shows an “ad valorem” or “excise” tax based on the assessed value, that piece is deductible. The rest is not.2Internal Revenue Service. Topic No. 503, Deductible Taxes
The Cap Only Matters If You Itemize
A higher SALT cap does nothing for you if you take the standard deduction. For 2026, the standard deduction is $32,200 for married filing jointly, $16,100 for single, $16,100 for married filing separately, and $24,150 for head of household. Taxpayers 65 and older get an additional $2,050 (single) or $1,650 (married or surviving spouse).4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Itemizing beats the standard deduction only when your total itemized deductions exceed those amounts. SALT is often the largest line for people in high-tax areas, but you have to add mortgage interest, charitable contributions, and any other qualifying items. A married couple paying $25,000 in state and local taxes and $10,000 in mortgage interest lands at $35,000 itemized, above the $32,200 standard. Under the old cap, that same couple would have been limited to $20,000 in itemized deductions and better off taking the standard.
If you have not itemized since 2017, this is worth recalculating for 2026.
Payments That Do Not Qualify
Some payments to government agencies look like they should count and do not:
- Foreign real property taxes are explicitly excluded.1Office of the Law Revision Counsel. 26 USC 164 – Taxes
- Special assessments for local improvements that tend to increase your property’s value, such as new sidewalks or sewer connections, are not deductible as property taxes.5Internal Revenue Service. Publication 530, Tax Information for Homeowners
- Utility fees, trash collection charges, flat vehicle registration fees, and licensing fees are not taxes based on value.
- Real estate transfer taxes generally get added to your cost basis rather than deducted as SALT.
The AMT Can Erase the Benefit Entirely
One boundary worth knowing: for alternative minimum tax purposes, state and local income taxes, property taxes, and sales taxes are completely disallowed.6Office of the Law Revision Counsel. 26 USC 56 – Adjustments in Computing Alternative Minimum Taxable Income If you owe AMT, the SALT deduction produces no federal tax savings, regardless of what the cap says. AMT primarily affects taxpayers with income roughly between $200,000 and $600,000 who have large itemized deductions. Fewer taxpayers currently owe it, but if you do, the higher 2026 cap will not help you.
What Happens After 2029
The increased cap is temporary. Starting with tax year 2030, the limit reverts to $10,000 ($5,000 married filing separately), and the income phasedown disappears. That is the same flat cap that applied from 2018 through 2024, with no inflation adjustment.1Office of the Law Revision Counsel. 26 USC 164 – Taxes
Whether Congress extends the higher cap, modifies it, or lets it revert is an open political question. The original TCJA provisions were scheduled to expire at the end of 2025 and were partially extended through the One Big Beautiful Bill Act. If you are making long-term decisions around property ownership or relocation, plan for the possibility that the cap drops back to $10,000 in 2030, while recognizing that Congress has a pattern of revisiting these provisions before they expire.