SALT deduction limit 2026: $40,400, but only if you itemize
The cap on deducting state, local and property taxes is $40,400 for 2026 returns, falling to $10,000 above about $606,000 of income. Five households, computed.
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The state and local tax (SALT) deduction limit for 2026 is $40,400, up from $40,000 for 2025 and from the $10,000 that applied from 2018 through 2024. It covers state and local income tax (or sales tax, not both) plus property tax, and it is only available if you itemize on Schedule A. Above $505,000 of modified adjusted gross income the cap shrinks by 30 cents per dollar, reaching the $10,000 floor at $606,334. A joint household with $300,000 of income, $32,000 of state income and property tax and $20,000 of mortgage interest itemizes $54,500 against a $34,200 standard total and pays $4,872 less federal tax. Under a $10,000 cap, that same household would have taken the standard deduction.
The numbers
Every figure below comes from the MoneyVibe standard vs itemized deduction calculator, which applies the 2026 SALT cap and phase-down, the 0.5% floor on charitable gifts, the 2026 standard deduction ($16,100 single, $32,200 joint) plus the $1,000 or $2,000 cash-gift deduction non-itemizers get, and the 2026 federal brackets. Federal tax is computed on adjusted gross income with no credits or other adjustments; dollar results are rounded to the nearest dollar (the engine's $6,768.50 and $1,942.50 appear as $6,769 and $1,943). The households are example inputs, not forecasts.
| Household (2026 adjusted gross income) | State, local and property tax paid | Other itemized items | Itemized total | Standard total | Federal tax saved by itemizing |
|---|---|---|---|---|---|
| Single renter, $150,000 | $9,000 | $2,000 gifts | $10,250 | $17,100 | $0 |
| Single homeowner, $200,000 | $21,000 | $14,000 mortgage interest, $3,000 gifts | $37,000 | $17,100 | $4,776 |
| Joint, $300,000 | $32,000 | $20,000 mortgage interest, $4,000 gifts | $54,500 | $34,200 | $4,872 |
| Joint, $560,000 | $50,000 (cap $23,900) | $25,000 mortgage interest, $8,000 gifts | $54,100 | $34,200 | $6,769 |
| Joint, $650,000 | $56,000 (cap $10,000) | $25,000 mortgage interest, $8,000 gifts | $39,750 | $34,200 | $1,943 |
The renter never reaches the cap and never itemizes: $10,250 of deductions is $6,850 short of the $17,100 standard total ($16,100 plus the $1,000 gift deduction for non-itemizers), so the SALT limit does not touch this return at all. The homeowner at $200,000 pays $21,000 of state income and property tax; all of it counts, and with mortgage interest and gifts the return itemizes $37,000 and saves $4,776.
What the higher cap is worth can be seen by rerunning the same households with only $10,000 of state and local tax allowed. The single homeowner would still itemize ($26,000) but save $2,136 instead of $4,776, so the 2026 cap is worth $2,640 of federal tax on this return. The $300,000 joint household would have $32,500 of itemized deductions, $1,700 short of the standard total, and would take the standard deduction; the whole $4,872 of savings exists because the cap moved.
The two highest-income rows show the phase-down. At $560,000 the cap is $40,400 less 30% of the $55,000 above $505,000, so $23,900: $26,100 of the $50,000 paid is lost. At $650,000 the cap has hit its $10,000 floor, and itemizing is worth only $1,943 even with $56,000 of state and property tax paid.
| Modified adjusted gross income, 2026 | SALT cap |
|---|---|
| $505,000 or less | $40,400 |
| $530,000 | $32,900 |
| $555,000 | $25,400 |
| $580,000 | $17,900 |
| $606,334 and above | $10,000 |
The phase-down raises the real cost of income inside the band. Take joint filers who pay $50,000 of state and property tax, $25,000 of mortgage interest and $8,000 in gifts. Moving from $495,000 to $505,000 of income adds $3,216 of federal tax, 32 cents per dollar. Moving from $505,000 to $515,000 adds $4,176, almost 42 cents per dollar: 32% on the $10,000, plus 32% on the $3,050 of deductions that disappear ($3,000 of SALT cap and $50 more of the 0.5% charity floor). A bonus, a Roth conversion or a capital gain that lands in this band carries that extra cost.
Why it works this way
Section 70120 of Public Law 119-21 (signed July 4, 2025) amended Internal Revenue Code section 164(b)(6) and added section 164(b)(7). The "applicable limitation amount" is $40,000 for tax years beginning in 2025, $40,400 for 2026, then 101% of the prior year's amount for 2027 through 2029, and $10,000 for tax years beginning after 2029. The threshold for the phase-down is $500,000 for 2025, $505,000 for 2026, and 101% of the prior year's figure after that. The reduction is 30% of modified adjusted gross income above the threshold, and the statute says it "shall not result in the applicable limitation amount being less than $10,000". Married individuals filing separately get half the cap and half the threshold. Modified adjusted gross income here means adjusted gross income plus anything excluded under sections 911, 931 or 933 (the foreign earned income and possessions exclusions), so for most filers it is simply AGI, the adjusted gross income line of Form 1040.
IRS Tax Topic 503 and the Schedule A instructions set out what counts toward the limit: state and local income taxes, or state and local general sales taxes in place of income taxes (the choice is made by checking box 5a on Schedule A), plus state and local real property taxes and personal property taxes, the amounts on lines 5a, 5b and 5c. Foreign income taxes go on line 6, outside the cap. Taxes are deductible in the year you pay them, which includes withholding on your W-2, estimated payments and prior-year balances paid during 2026. The Schedule A instructions describe the same mechanics for 2025 returns: line 5e is the smaller of your total on line 5d or the cap, and filers above the threshold use the State and Local Tax Deduction Worksheet. The 2026 Schedule A instructions were not yet published when this was written; the amounts above come from the statute.
The cap is one piece of the itemize-or-not decision, which is why the renter row shows $0. Revenue Procedure 2025-32 sets the 2026 standard deduction at $16,100 (single), $24,150 (head of household) and $32,200 (joint), and from 2026 someone who takes the standard deduction may also deduct up to $1,000 ($2,000 joint) of cash gifts. Itemizing only helps when the capped SALT figure plus mortgage interest, gifts above 0.5% of AGI, medical costs above 7.5% of AGI and other Schedule A items beat that total.
What changes the answer
- Whether you clear the standard deduction at all. The single renter at $150,000 with $9,000 of state tax and $2,000 of gifts is $6,850 short. With $14,000 of state tax the gap is $1,850; with $17,000 of state tax itemizing wins by $276. For most renters in no-tax or low-tax states, the SALT cap is irrelevant.
- Your marginal rate. Each dollar of deduction is worth your marginal federal rate: the $200,000 and $300,000 households are in the 24% bracket, the $560,000 household straddles the 32% and 35% brackets, so its $19,900 of itemized deductions above the standard total save $6,769, about 34 cents per dollar. The tax bracket calculator shows your rate.
- Income near $505,000. If you pay at least as much state and local tax as the cap allows, income inside the phase-down band costs its bracket rate plus 30% of that rate again, as the $4,176 step above shows. Someone paying $20,000 of state and property tax at $560,000 loses nothing, because the $23,900 cap is still above what they paid. Anything that moves modified AGI, including a Roth conversion, moves the cap.
- When you pay. The cap applies per year to the amount paid. A household below the $505,000 threshold in both years that pays $46,000 of state and property tax in one year and $18,000 the next counts $40,400 plus $18,000, $58,400 in total (the second-year cap is 1% higher, $40,804, which does not change this); paid as $32,000 and $32,000 it counts all $64,000. Paying above the cap in a single year wastes the excess.
What to do first
- Add up what you will have paid in 2026: state and local income tax withheld (year-to-date on a pay stub), estimated payments, any 2025 state balance paid this year, and property tax bills paid in 2026. If you live in a state without an income tax, use the sales-tax figure from the IRS tables instead.
- Enter that total with your mortgage interest and planned gifts in the standard vs itemized deduction calculator. It applies the cap at your income, sets the itemized total against the standard total and shows the federal tax difference.
- If your modified AGI will be between $505,000 and $606,334 and your state and property taxes exceed the cap, run the calculator with and without any ordinary income you control the timing of (a bonus, a Roth conversion). The phase-down turns a 32% or 35% bracket into roughly 42% or 45% inside the band. Long-term capital gains also shrink the cap but are taxed at their own rates, and the calculator treats all income as ordinary, so test a sale separately.
What this does not model
Married filing separately (the cap, threshold and floor are halved), the alternative minimum tax, state income tax rules, the optional sales tax tables, the foreign earned income exclusion's effect on modified AGI, pass-through entity tax elections some states offer business owners, the $750,000 mortgage-debt limit (enter interest already within it), age and blindness additions to the standard deduction, and the qualified business income deduction and other below-the-line items. All income is taxed at ordinary rates, so capital gains, qualified dividends and the net investment income tax are not modeled. The calculator does apply the overall limit on itemized deductions that begins where the 37% bracket starts ($640,600 single, $768,700 joint in 2026); none of the example households reach it.
Next steps: run your own figures in the standard vs itemized deduction calculator, check your rate in the tax bracket calculator, read the library chapter deductions, credits and the yearly check-up, or see the glossary entries for the standard deduction and the marginal tax rate.
Not tax or legal advice. Federal rules as enacted in Public Law 119-21 and published by the IRS, read on October 10, 2026; confirm with a tax professional before acting.