Key Takeaways
- The SALT cap rose from $10,000 to $40,400 for 2026 under the One Big Beautiful Bill Act (OBBBA).
- Above $505,000 MAGI, the deduction phases down 30 cents per dollar of extra income.
- It never falls below a $10,000 floor, no matter how high your income climbs.
- You only benefit if your itemized deductions exceed the standard deduction ($16,100 / $32,200 / $24,150 for 2026).
- The higher cap is temporary — it reverts to $10,000 in 2030 under current law.
What Is the SALT Deduction?
SALT stands for State And Local Taxes, and the deduction lets you subtract certain taxes you've already paid to your state and local government from the income the IRS taxes you on. Think of it as the federal government agreeing not to tax you twice on the same dollar. You can only claim it if you itemize your deductions instead of taking the standard deduction — so it's worth checking the math in the section below before you assume it applies to you.
What Changed for 2026?
The cap on this deduction jumped from $10,000 to $40,400 under the One Big Beautiful Bill Act (OBBBA), signed into law in 2025. For married couples filing separately, the cap is half that amount — $20,200. The increase applies through the 2029 tax year, rising roughly 1% annually under IRC §164, before reverting to a flat $10,000 in 2030 under current law.
The higher cap doesn't lower your tax rate — it changes how much of what you already paid your state you also get to deduct federally. For higher earners, the phase-out below can claw back a meaningful piece of that increase.
What Counts as SALT?
Three categories qualify: property taxes, and either state income tax or state sales tax — never both.
- Property taxes on your home
- Property taxes on cars, boats, or other vehicles — often overlooked
- State and local income tax or state and local sales tax, whichever is higher for you
If your state has an income tax, deducting income tax almost always beats sales tax. If you live somewhere with no state income tax, the IRS's sales tax calculator is easier than saving receipts all year.
The High-Income Phase-Out
Above $505,000 of modified adjusted gross income (MAGI), the $40,400 cap starts shrinking — by 30 cents for every extra dollar of income. It stops shrinking once it hits the $10,000 floor, which happens at roughly $606,000 of MAGI.
| Your MAGI | What happens | SALT deduction you can claim |
|---|---|---|
| $450,000 | Below the $505,000 line — full cap applies | Up to $40,400 |
| $550,000 | $45,000 over the line × 30% = $13,500 lost | $26,900 |
| $650,000+ | Fully phased down — floor applies | $10,000 |
$505,000 to roughly $606,000 MAGI is the zone where a bonus, stock sale, or year-end Roth conversion can shrink your SALT deduction faster than expected — 30 cents lost per extra dollar, on top of whatever rate you're already paying on that income.
Is Itemizing Even Worth It?
SALT only helps if your total itemized deductions clear the 2026 standard deduction. If your combined SALT, mortgage interest, and charitable giving don't add up to more than the numbers below, the standard deduction still wins — no extra paperwork required.
| Filing status | 2026 standard deduction |
|---|---|
| Single | $16,100 |
| Married filing jointly | $32,200 |
| Head of household | $24,150 |
How to Make the Most of It Before Year-End
- Add up every dollar that counts. Home property tax, car/boat tax, and state income or sales tax (whichever is bigger) — don't leave the smaller ones off the list.
- Check the math before you itemize. Compare your full itemized total to the 2026 standard deduction — itemizing only helps once you clear that number.
- Consider "bunching" property tax payments. If your next bill is already assessed, paying it before December 31 can push more deduction into a year you're itemizing anyway.
- Watch your income near the $505,000–$606,000 MAGI band. Timing large income events matters more than it looks like it should.
- Use it while it lasts. This higher cap is scheduled to disappear after 2029.
A married couple with $560,000 in MAGI pays $19,000 in property tax and $24,000 in state income tax — $43,000 in total SALT. Their income is $55,000 over the $505,000 line, so their cap shrinks by $16,500 (30% × $55,000), landing at $23,900. Even though they paid $43,000, they can only deduct $23,900 on their federal return.
Frequently Asked Questions
What is the SALT deduction?
It lets taxpayers who itemize deduct certain state and local taxes — property tax plus either income or sales tax — from their federal taxable income, up to a set cap.
Did the SALT deduction go up in 2026?
Yes. Under the One Big Beautiful Bill Act, the cap is $40,400 for 2026 ($20,200 for married filing separately), up from the prior $10,000 limit.
Why does my SALT deduction shrink at higher income?
Above $505,000 of MAGI, the cap phases down by 30 cents for every extra dollar of income, until it reaches a $10,000 floor.
Is the SALT deduction ever fully eliminated?
No. It never drops below $10,000, regardless of how high your income climbs.
Should I still itemize if my SALT is under the cap?
Only if your total itemized deductions — SALT plus mortgage interest, charitable gifts, and similar items — exceed your 2026 standard deduction.
Will the higher SALT cap last?
Under current law, no. It's scheduled to revert to a flat $10,000 in 2030, with no phase-out rules at all.
- §IRC §164 — State and local tax deduction (Cornell Legal Information Institute)
- §One Big Beautiful Bill Act (OBBBA), P.L. 119-21
- §IRS Rev. Proc. 2025-32 — 2026 inflation adjustments
- §IRS Topic No. 503 — Deductible Taxes
Wondering What Your SALT Deduction Actually Looks Like?
Pocket CPA helps business owners and high-income individuals see exactly where the phase-out hits their return — and what to do about it before year-end.
Not sure if we are the right fit? Send us a message — we will tell you honestly.