SALT Deduction Gets an Update for 2026 Taxes
For homeowners facing steep property tax bills alongside high housing costs, the state and local tax deduction (SALT) may offer some federal tax relief in 2026 — especially for those in high-tax states who itemize their deductions.
The SALT deduction is larger than before 2025, and this year’s limit gets another increase due to scheduled inflation adjustments. These changes could allow some taxpayers to deduct substantially more of their property and state income taxes than they could under the $10,000 cap that had been in place for years.
Here’s more to know.
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New SALT tax deduction 2026 limit
The SALT deduction allows taxpayers who itemize to subtract certain state and local taxes from their federal taxable income.
For the 2026 tax year, taxpayers who itemize can deduct up to $40,400 in qualifying state and local taxes. The limit is $20,200 for married couples filing separately
That’s a $400 increase from the $40,000 limit that applied for the 2025 tax year.
- The deduction can include qualifying state and local income taxes, sales taxes and property taxes, subject to the overall limit.
- Taxpayers generally can deduct either state and local income taxes or sales taxes, but not both.
The expanded limit is particularly notable for homeowners because property taxes can account for a significant portion of the annual cost of owning a home. Under the old rules, taxpayers could be limited to a $10,000 SALT deduction even if they paid far more in state and local taxes.
Higher-income SALT deduction phaseout
But…keep in mind that the $40,400 deduction isn’t available in full to every taxpayer.
- For 2026, the expanded SALT deduction begins to phase down when modified adjusted gross income (MAGI) exceeds $505,000, or $252,500 for married couples filing separately.
- The deduction is reduced by 30% of the amount by which income exceeds the applicable threshold.
- The reduction can’t push the SALT deduction below $10,000, or $5,000 for married couples filing separately.
That means some higher-income taxpayers can still claim a SALT deduction, even after the expanded portion of the benefit has phased out.
Yes, you still have to itemize
The higher SALT cap doesn’t mean every homeowner gets a $40,400 tax deduction. (SALT is an itemized deduction, so taxpayers need to compare their itemized deductions with the standard deduction.)
For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.
For some homeowners, property taxes, combined with state income taxes, mortgage interest, and other deductible expenses, could make itemizing worthwhile. For others, the standard deduction may still provide the larger tax benefit.
And remember: A tax deduction isn’t a dollar-for-dollar reduction in taxes. It reduces the amount of income subject to tax.
The big SALT change came in 2025
The 2026 $40,400 SALT cap is part of a temporary expansion created by the Trump/GOP 2025 tax law overhaul.
First, a little background: Before 2018, there was no limit on the amount that could be deducted. But the 2017 Tax Cuts and Jobs Act (TCJA), also known as the “Trump tax cuts,” imposed a $10,000 SALT deduction cap ($5,000 for married individuals filing separately) from 2018 through 2025.
In his second term as president and amid political debate over the cap being too low, Donald Trump called for increasing the SALT deduction limit. So, the SALT cap increased from $10,000 to $40,000 for 2025 and is scheduled to increase by 1% each year through 2029. The income threshold for the phaseout also increases by 1% annually.
Under current law, the SALT cap is scheduled to be:
2025: $40,000
2026: $40,400
2027: $40,804
2028: $41,212
2029: $41,624
2030: $10,000
*Income phase-outs for each of those years will also adjust accordingly.
Beginning in 2030, if Congress doesn’t act with new legislation, the SALT deduction cap is scheduled to return to $10,000 for most taxpayers and to $5,000 for married couples filing separately.
Other homeowner tax breaks to know
SALT isn’t the only federal tax break that may help offset some of the costs of owning a home.
Mortgage Interest: Homeowners who itemize generally can deduct interest paid on qualifying mortgage debt, subject to federal limits. Interest on a home equity loan or line of credit can also qualify when the money is used to buy, build, or substantially improve the home.
Mortgage Points: Points paid on a mortgage used to buy or substantially improve a primary residence may be deductible, subject to IRS requirements.
Home Sale Gains: Homeowners who sell a primary residence at a profit may be able to exclude up to $250,000 of the gain, or up to $500,000 for married couples filing jointly, if they meet the ownership and use requirements.
Homeowner tax breaks that don’t carry into 2026 are the federal credits for energy-efficient home improvements. The 2025 tax law ended the Energy Efficient Home Improvement Credit and Residential Clean Energy Credit for qualifying activity after Dec. 31, 2025.
