What the SALT deduction is
If you itemize, you can deduct state and local taxes you paid during the year: income tax (or general sales tax instead, if you choose), real estate tax, and personal property tax. The total is capped. The 2025 tax law (Public Law 119-21, often called the One Big Beautiful Bill) raised the cap from $10,000 to $40,000 for 2025 and $40,400 for 2026, then 1% more each year through 2029. From 2030 it goes back to $10,000. Married people filing separately get half of each amount.
The higher cap shrinks for high earners. Above $500,000 of modified AGI in 2025 ($505,000 in 2026), the cap drops by 30% of the excess, but never below $10,000 ($5,000 filing separately).
How it's calculated
SALT deduction = smaller of taxes paid or limit
Married filing separately: threshold ÷ 2, then limit ÷ 2
This follows the State and Local Tax Deduction Worksheet in the 2025 Schedule A instructions line by line, with the 2026 cap and threshold the IRS published. MAGI here is your AGI plus any foreign earned income or housing excluded from income (Form 2555), or excluded income from Puerto Rico or American Samoa.
| 2025 | 2026 | |
|---|---|---|
| Cap | $40,000 | $40,400 |
| Cap, married filing separately | $20,000 | $20,200 |
| Phase-down starts (MAGI) | $500,000 | $505,000 |
| Phase-down starts, separately | $250,000 | $252,500 |
| Reduction | 30% of MAGI over the threshold | 30% of MAGI over the threshold |
| Never below | $10,000 ($5,000 separately) | $10,000 ($5,000 separately) |
Worked example
A single filer in 2026 has MAGI of $600,000 and paid $27,000 of state income and property tax. MAGI is $95,000 over $505,000, so the cap falls by 30% × $95,000 = $28,500, to $40,400 − $28,500 = $11,900. That's above the $10,000 floor, so the SALT deduction is $11,900. The other $15,100 of taxes can't be deducted. At $700,000 of MAGI the reduction would be $58,500, so the limit stops at the $10,000 floor.
Should you itemize?
The SALT deduction only helps if your itemized deductions add up to more than your standard deduction: $16,100 single, $32,200 joint and $24,150 head of household in 2026. The calculator adds your other itemized deductions and compares. For a full comparison with mortgage interest, charity and medical costs, use the standard vs itemized deduction calculator.
Limitations
- Taxes paid in a trade or business, or on rental property, aren't subject to this cap; they go on those schedules instead.
- Foreign real property taxes aren't deductible at all, and you can deduct state income tax or sales tax, not both.
- Only taxes paid during the year count, so a payment made in January for last year counts this year.
- Pass-through entity (PTE) tax elections and state workarounds are not modeled.
Sources
- IRS: Correction to the SALT deduction amount in the 2026 Form 1040-ES – 2026: $40,400 ($20,200), $505,000 ($252,500), floor $10,000 ($5,000)
- Instructions for Schedule A (2025) – 2025 line 5e worksheet: $40,000, $500,000, 30%, $10,000
- 26 U.S.C. 164(b)(6)–(7) – 1% yearly increase to 2029, $10,000 from 2030, MAGI definition
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments) – 2026 standard deduction