SALT Deduction: How the State and Local Tax Cap Works in 2026
Last updated 07/21/2026 by
Andrew Latham
Edited by
Andrew Latham
Summary:
The SALT deduction is a federal itemized deduction that lets taxpayers subtract certain state and local taxes they paid during the year from their federal taxable income.
It covers a few defined taxes and only helps if you itemize instead of taking the standard deduction.
- State and local income taxes: Amounts withheld from pay or paid through estimated payments to a state or locality.
- Sales taxes: An alternative to income taxes, chosen most often by people in no income tax states.
- Property taxes: Value based taxes on real estate and certain personal property.
- The cap: A dollar limit on the combined total of these taxes you can deduct.
If you live in a high tax state or own a home, state and local taxes can be some of your largest annual bills. The SALT deduction lets you recover part of that on your federal return, within a cap that changed dramatically for 2025.
How the SALT deduction works
The SALT deduction lets you deduct state and local taxes you paid from your federal taxable income. You claim it on Schedule A of Form 1040, which means you must itemize rather than take the standard deduction.
Because it is an itemized deduction, it only produces savings when your total itemized deductions exceed your standard deduction for the year.
According to the Internal Revenue Service, the deductible taxes are state and local income taxes or sales taxes, plus real estate and personal property taxes. You choose income taxes or sales taxes, not both.
The SALT cap and how it changed
The SALT deduction is limited by a dollar cap on the combined total you can claim. The cap was $10,000 for years, but recent legislation raised it sharply for 2025.
The 2017 Tax Cuts and Jobs Act set the cap at $10,000, or $5,000 for married couples filing separately, starting in 2018. The One Big Beautiful Bill Act then raised it for 2025 and set a new schedule.
| Tax year | SALT cap (single or joint) | Married filing separately |
|---|---|---|
| 2018 to 2024 | $10,000 | $5,000 |
| 2025 | $40,000 | $20,000 |
| 2026 | $40,400 | $20,200 |
| 2027 to 2029 | Prior year cap plus 1% per year | Half of the joint cap |
| 2030 onward | Reverts to $10,000 | $5,000 |
A taxpayer with $30,000 in state income taxes and $15,000 in property taxes has $45,000 in SALT, but for 2025 the deduction is limited to the $40,000 cap. Under the old $10,000 cap, that same taxpayer could deduct far less.
The cap does not double for married couples filing jointly. A couple filing jointly faces the same $40,000 ceiling as a single filer, a quirk critics call a marriage penalty within the SALT rules.
The phase-out for high earners
The expanded cap phases down once income climbs above a set threshold. For 2025, the $40,000 cap is reduced by 30% of the amount your modified adjusted gross income exceeds $500,000, but it never falls below $10,000.
That threshold rises to $505,000 for 2026, so your modified adjusted gross income decides how much of the larger cap you actually keep.
A filer with MAGI of $600,000 in 2025 is $100,000 over the threshold, which trims the cap by $30,000 to $10,000 for that year.
Pro Tip
If you live in a state without an income tax, you can deduct state and local sales taxes instead within the same cap. The IRS offers an optional Sales Tax Deduction Calculator that estimates your deductible sales taxes from your income and household size, or you can use actual receipts if you tracked large purchases like a vehicle.
Who is most affected by the SALT cap
The cap hits hardest for taxpayers in high tax states with high property values. Above average state income taxes combined with large property tax bills can push a household past the limit quickly.
| State | Top state income tax rate | Average effective property tax rate |
|---|---|---|
| California | 13.3% | 0.71% |
| New York | 10.9% | 1.54% |
| New Jersey | 10.75% | 2.23% |
| Illinois | 4.95% (flat) | 2.08% |
| Connecticut | 6.99% | 1.79% |
Taxpayers in no income tax states like Florida and Texas pay no state income tax but can still face significant property tax bills, so their entire cap may go toward property taxes and sales taxes. Claiming the deduction correctly starts with a few clear steps.
How to claim the SALT deduction
- Total your state and local taxes: Add income or sales taxes plus property taxes paid during the year.
- Choose income or sales tax: Pick whichever is larger, since you cannot claim both.
- Apply the cap: Limit the combined total to the cap for your filing year and status.
- Compare to the standard deduction: Itemize only if your total itemized deductions exceed the standard deduction.
- File Schedule A: Report the capped amount on Schedule A and attach it to your Form 1040.
Keeping receipts for major purchases can tip the math toward the sales tax option in a year when you bought a car or made other large taxable purchases.
Which property taxes qualify
Not every property related charge counts toward the SALT deduction. The IRS separates deductible value based taxes from non-deductible fees and assessments.
- Deductible: State and local property taxes based on the value of real estate, including a primary home and a second home.
- Deductible: Value based personal property taxes, such as annual vehicle taxes assessed as a percentage of value.
- Not deductible: Special assessments for local improvements like sidewalks, sewers, or street paving.
- Not deductible: Transfer taxes or recording fees paid when buying or selling a home.
- Not deductible as SALT: Property taxes on a rental, which are a business expense on Schedule E instead.
Good to know: Many high tax states created Pass-Through Entity Tax elections after 2017. Owners of S-corps or partnerships can have the business pay state income tax at the entity level, where it is deductible as a business expense and sidesteps the personal SALT cap.
How SALT interacts with the standard deduction and the AMT
Itemizing only pays off when your itemized deductions beat the standard deduction. The table below shows the 2025 cap alongside the 2025 standard deduction by filing status.
| Filing status | 2025 SALT cap | 2025 standard deduction |
|---|---|---|
| Single | $40,000 | $15,750 |
| Married filing jointly | $40,000 | $31,500 |
| Married filing separately | $20,000 | $15,750 |
| Head of household | $40,000 | $23,625 |
Comparing your itemized total against the standard deduction is the deciding step before you claim SALT.
The deduction is also disallowed under the alternative minimum tax, so filers who fall into the AMT lose the SALT benefit regardless of the cap.
Related reading on taxes
- An itemized deduction is claimed on Schedule A and must beat the standard deduction to be worth taking.
- A tax deduction lowers the income you are taxed on, unlike a credit that cuts tax owed directly.
- The property tax you pay each year is often the largest piece of a SALT claim.
Frequently asked questions
What does SALT stand for?
SALT stands for “state and local tax.” The SALT deduction lets you deduct certain state and local income, sales, and property taxes on your federal return if you itemize.
What is the SALT deduction cap for 2025 and 2026?
The cap is $40,000 for 2025 and $40,400 for 2026, with half those amounts for married taxpayers filing separately. It is scheduled to revert to $10,000 in 2030.
Can I deduct both state income tax and sales tax?
No. You must choose either state and local income taxes or state and local sales taxes, not both. Most filers pick whichever is larger.
Does the SALT deduction help if I take the standard deduction?
No. SALT is an itemized deduction, so it only lowers your taxes when your total itemized deductions exceed the standard deduction for your filing status.
Key takeaways
- The SALT deduction lets you deduct state and local income or sales taxes plus property taxes if you itemize.
- You must choose income taxes or sales taxes, not both.
- The cap rose from $10,000 to $40,000 for 2025 and $40,400 for 2026 under the One Big Beautiful Bill Act, then reverts to $10,000 in 2030.
- The expanded cap phases down once modified adjusted gross income exceeds $500,000 in 2025, but never below $10,000.
- SALT only helps taxpayers whose itemized deductions beat the standard deduction, and it is disallowed under the AMT.
Knowing how the SALT deduction works helps you decide whether itemizing is worth it in a given year. You can compare tax preparation services that handle Schedule A and help you claim state and local taxes correctly.
Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.
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