The IRS 2026 SALT cap is $40,400 for single filers and married couples filing jointly ($20,200 for married filing separately), up from $40,000 in 2025 and $10,000 under prior law. That $40,400 figure is the indexed 2026 amount set by a 1% annual increase written into 26 U.S. Code § 164(b)(7), and it applies to the combined total of your state and local taxes claimed on Schedule A.
Yes, the IRS 2026 SALT cap is $40,400 ($20,200 if married filing separately), a 1% increase over the 2025 cap of $40,000 and far above the old $10,000 limit (Source: 26 U.S.C. § 164(b)(7); CRS Report R48611). The cap phases down for high earners starting at $505,000 of modified adjusted gross income and is scheduled to revert to $10,000 in 2030.
What is the SALT deduction cap for 2026?
The SALT deduction cap for 2026 is $40,400 for single, head of household, and married-filing-jointly taxpayers, and $20,200 for those married filing separately (Source: 26 U.S.C. § 164(b)(7); CRS Report R48611). This is the maximum amount of state and local taxes a filer may claim as an itemized deduction on IRS Schedule A in tax year 2026.
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That $40,400 amount is not a round number by accident. The One Big Beautiful Bill Act (OBBBA), Public Law 119-21, set the cap at $40,000 for 2025 and directed that it rise by 1% each year through 2029. Applying 101% to the 2025 amount produces exactly $40,400 for 2026 (Source: 26 U.S.C. § 164(b)(7)(A)).
The cap covers a combined total. State and local income taxes (or sales taxes), plus real property taxes, are added together and measured against the single $40,400 ceiling. It is not $40,400 per category.
Is the SALT cap $10,000 or $40,400 in 2026? How it changed from 2025
For 2026 the SALT cap is $40,400, not $10,000. The $10,000 figure was the cap under the 2017 Tax Cuts and Jobs Act (TCJA), which applied from 2018 through 2024 (Source: 26 U.S.C. § 164(b)(7)). OBBBA, signed July 4, 2025, raised the cap to $40,000 for 2025 and set a fixed 1% annual step-up, which produces $40,400 for 2026 (Source: Public Law 119-21, congress.gov).
Watch the year attached to any figure. Some widely read explainers still print $40,000 (the 2025 number) when discussing 2026. The correct 2026 values are a $40,400 cap and a $505,000 phase-out threshold.
The table below shows the applicable limitation amount by year. The 2025 and 2026 amounts are confirmed by statute and the Congressional Research Service; the 2027 through 2029 figures follow the statute’s fixed 101% annual formula; the 2030 figure reflects the scheduled sunset.
| Tax year | Single / MFJ cap | MFS cap | Basis |
|---|---|---|---|
| 2018 to 2024 | $10,000 | $5,000 | TCJA (prior law) |
| 2025 | $40,000 | $20,000 | OBBBA, confirmed |
| 2026 | $40,400 | $20,200 | OBBBA, confirmed |
| 2027 | $40,804 | $20,402 | Derived from 101% formula |
| 2028 | $41,212 | $20,606 | Derived from 101% formula |
| 2029 | $41,624 | $20,812 | Derived from 101% formula |
| 2030 and after | $10,000 | $5,000 | Statutory reversion |
Does the SALT deduction include property taxes, and which taxes count?
Yes. The 2026 SALT deduction includes real property taxes, and it also includes either state and local income taxes or state and local general sales taxes. All of these are combined and measured against the single $40,400 cap (Source: 26 U.S.C. § 164(b)). Certain personal property taxes, such as value-based vehicle registration fees, can also qualify under the same section.
You choose income tax or sales tax, not both. A filer may deduct state and local income taxes, or elect to deduct state and local general sales taxes instead, but not both in the same year (Source: IRC § 164). Residents of no-income-tax states such as Florida, Texas, and Washington typically take the sales-tax election.
Federal income tax, Social Security tax, and most federal-level levies never count toward the SALT deduction. Only state and local taxes described in section 164 are eligible.
At what income does the SALT deduction phase out in 2026?
The 2026 SALT deduction begins phasing down once modified adjusted gross income (MAGI) exceeds $505,000 ($252,500 for married filing separately). Above that threshold, the $40,400 cap is reduced by 30 cents for every dollar of MAGI over the line, but it never falls below a $10,000 floor ($5,000 MFS) (Source: 26 U.S.C. § 164(b)(7)(B)).
The mechanics run in four steps for a 2026 joint filer:
- Start with the $40,400 cap.
- Subtract $505,000 from your MAGI to find the excess.
- Multiply that excess by 30% (0.30). This is the reduction.
- Subtract the reduction from $40,400, but stop at the $10,000 floor.
Worked example (illustrative). A joint filer with MAGI of $750,000 in 2026 has $245,000 of excess over the $505,000 threshold. Thirty percent of $245,000 is $73,500, which is larger than the entire $40,400 cap, so the deduction floors at $10,000 (Source: statute mechanics, 26 U.S.C. § 164(b)(7)(B)).
The phase-down cliff between $505,000 and $606,333
For a 2026 joint filer, the SALT reduction is fully exhausted at $606,333 of MAGI. At that point the 30% haircut has erased $30,400 of the $40,400 cap, leaving exactly the $10,000 floor; any MAGI above it stays at $10,000 (Source: illustrative calculation from 26 U.S.C. § 164(b)(7)(B): ($40,400 minus $10,000) / 0.30 + $505,000 = $606,333).
Inside that roughly $101,000-wide band, an extra dollar of income does more than get taxed at the ordinary rate. Each additional dollar of MAGI also removes 30 cents of SALT deduction, which adds 30 cents to taxable income on top of the dollar itself. The result is an effective marginal spike: a dollar earned in the phase-out zone can behave like $1.30 of taxable income before any sunset provision is considered.
| 2026 MAGI (MFJ) | Excess over $505,000 | 30% reduction | Allowed SALT deduction |
|---|---|---|---|
| $505,000 or below | $0 | $0 | $40,400 (full) |
| $550,000 | $45,000 | $13,500 | $26,900 |
| $600,000 | $95,000 | $28,500 | $11,900 |
| $606,333 | $101,333 | $30,400 | $10,000 (floor) |
| $650,000 and above | $145,000 or more | capped by floor | $10,000 (floor) |
Because the phase-out keys off MAGI rather than plain taxable income, income events that raise MAGI can shrink the deduction. This same MAGI sensitivity is why high earners often track thresholds for the net investment income tax in the same planning year.
Do I have to itemize to claim the SALT deduction in 2026?
Yes. The SALT deduction is an itemized deduction claimed on Schedule A, so a filer receives no SALT benefit unless total itemized deductions exceed the standard deduction (Source: IRC § 164; IRS Schedule A). For 2026 the standard deduction is $16,100 for single and MFS filers, $32,200 for joint filers, and $24,150 for head of household (Source: IRS, tax inflation adjustments for tax year 2026; Rev. Proc. 2025-32).
The higher cap changes the math for many households. With up to $40,400 of SALT now potentially deductible, SALT alone can exceed the 2026 standard deduction in high-tax states, so households that previously took the standard deduction may benefit from itemizing.
| Filing status | 2026 standard deduction | 2026 maximum SALT cap |
|---|---|---|
| Single | $16,100 | $40,400 |
| Married filing jointly | $32,200 | $40,400 |
| Married filing separately | $16,100 | $20,200 |
| Head of household | $24,150 | $40,400 |
Who benefits most from the higher SALT cap?
The households that gain most from the 2026 SALT cap are homeowners in high-tax states such as New Jersey, New York, California, Illinois, and Connecticut, generally with MAGI below the $505,000 phase-out threshold, where the full $40,400 cap is available and combined state and property taxes are large (Source: statute mechanics, 26 U.S.C. § 164(b)(7)). Renters, lower-tax-state residents, and those taking the standard deduction typically see little or no change.
The illustrative examples below assume a joint filer below the $505,000 phase-out threshold, comparing the deductible SALT amount under the 2026 $40,400 cap against the prior $10,000 cap. Figures are rounded and for illustration only; the deductible amount is not a tax saving, and actual results depend on each filer’s full return.
| Profile (MFJ, illustrative) | State income tax | Property tax | Combined SALT | Deductible under 2026 cap | Deductible under prior $10k cap |
|---|---|---|---|---|---|
| New Jersey homeowner | $14,000 | $18,000 | $32,000 | $32,000 | $10,000 |
| California homeowner | $28,000 | $13,000 | $41,000 | $40,400 (capped) | $10,000 |
| New York homeowner | $22,000 | $16,000 | $38,000 | $38,000 | $10,000 |
| Florida homeowner (sales-tax election) | $2,500 (sales) | $9,000 | $11,500 | $11,500 | $10,000 |
The pattern tracks how much combined state and local tax a household pays. A high-tax-state homeowner may shift tens of thousands of dollars from the standard deduction into itemized SALT, though whether that produces any federal tax reduction depends on the filer’s total itemized deductions and marginal rate.
Does PTET still work, and what about the 2030 sunset?
Under the enacted 2026 law, the pass-through entity tax (PTET) workaround remains available alongside the higher SALT cap. PTET lets an owner of a partnership or S corporation have the entity pay and deduct state income tax at the business level, outside the individual SALT cap. Earlier drafts of OBBBA proposed limiting PTET deductions, but the enacted law (Public Law 119-21) contains no such restriction, so entity-level deductibility rests on IRS Notice 2020-75 (Source: IRS Notice 2020-75; Thomson Reuters, “OB3 SALT Cap Increase: Why Pass-through Entity Tax Elections Still Make Sense,” 2025). Availability and rules vary by state.
The higher cap is scheduled to sunset. For tax years beginning after 2029, the applicable limitation amount reverts to $10,000 ($5,000 MFS) and the income phase-down disappears (Source: 26 U.S.C. § 164(b)(7)(A) and (B)). Absent new legislation, 2029 is the last year of the higher cap.
The Section 68 top-bracket itemized-deduction limit (2/37 haircut from 2026)
A separate OBBBA provision quietly trims the value of a large SALT deduction for top-bracket filers starting in 2026. Under the amended Internal Revenue Code section 68, itemized deductions are reduced by 2/37 of the lesser of total itemized deductions or the taxable income (increased by those deductions) that exceeds the start of the 37% bracket (Source: 26 U.S.C. § 68 as amended by Public Law 119-21; CRS Report R48571).
In practice this caps the marginal benefit of an itemized deduction at roughly 35 cents per dollar instead of 37 cents for income in the top bracket. The 37% bracket begins at $640,600 for single filers and $768,700 for joint filers in 2026, so the 2/37 haircut only touches the highest earners, and often overlaps the same MAGI range as the SALT phase-out (Source: IRS Rev. Proc. 2025-32 for the 2026 bracket thresholds).
How this interacts with Roth conversion timing
Because the 2026 SALT phase-out keys off MAGI, a large income event can push a joint filer toward the $505,000 threshold and shrink the deduction through the 30% reduction. A Roth conversion raises MAGI in the conversion year, so the SALT phase-out, the conversion amount, and the 2030 sunset can intersect in the same planning window. This is educational information, not a recommendation.
Some households study these interactions when deciding how much to convert to a Roth and when to act before the Roth conversion deadline. MAGI-sensitive items reviewed in the same tax year can also include required minimum distributions, which add to MAGI once they begin.
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Frequently asked questions
The questions below summarize the 2026 SALT deduction rules under the One Big Beautiful Bill Act: the $40,400 cap, the $20,200 married-filing-separately amount, the phase-out that begins at $505,000 of MAGI, the requirement to itemize on Schedule A, and the scheduled reversion to $10,000 in 2030. Each answer cites the governing statute or IRS guidance.
Is the SALT cap $10,000 or $40,400 in 2026?
For 2026 the SALT cap is $40,400, not $10,000. The $10,000 limit applied under the Tax Cuts and Jobs Act from 2018 through 2024, and it is scheduled to return in 2030 (Source: 26 U.S.C. § 164(b)(7)). The One Big Beautiful Bill Act raised the cap to $40,000 for 2025 and set a 1% annual increase, producing $40,400 for 2026.
At what income does the SALT deduction phase out in 2026?
The 2026 SALT deduction phase-out begins at $505,000 of modified adjusted gross income ($252,500 MFS). Above that, the $40,400 cap is reduced by 30 cents per dollar of MAGI over the threshold, never dropping below a $10,000 floor (Source: 26 U.S.C. § 164(b)(7)(B)). For joint filers the reduction is fully exhausted at about $606,333 of MAGI.
Does the SALT deduction include property taxes?
Yes. The 2026 SALT deduction includes real property taxes, combined with either state and local income taxes or state and local general sales taxes, all measured against the single $40,400 cap (Source: 26 U.S.C. § 164(b)). Certain value-based personal property taxes can also count. Federal taxes and Social Security tax never qualify.
Do you have to itemize to claim the SALT deduction?
Yes. The SALT deduction is claimed on Schedule A, so it provides no benefit unless total itemized deductions exceed the standard deduction (Source: IRC § 164; IRS). For 2026 the standard deduction is $32,200 (MFJ), $16,100 (single/MFS), and $24,150 (head of household), so SALT plus other itemized items must clear those amounts to help.
Will the SALT cap revert to $10,000?
Yes, under current law. For tax years beginning after 2029, the SALT cap reverts to $10,000 ($5,000 MFS) and the income phase-down no longer applies (Source: 26 U.S.C. § 164(b)(7)(A) and (B)). Tax year 2029 is the last year of the higher cap unless Congress passes new legislation to extend it.
Can you deduct both state income tax and sales tax?
No. A filer may deduct either state and local income taxes or state and local general sales taxes in a given year, but not both (Source: IRC § 164). Most residents of income-tax states deduct income tax, while residents of no-income-tax states such as Florida and Texas usually elect the sales-tax deduction. Property tax is added on top of whichever is chosen.
Does the SALT cap apply to married filing separately?
Yes. Married-filing-separately taxpayers have a 2026 SALT cap of $20,200, half the $40,400 joint figure, with a phase-out beginning at $252,500 of MAGI and a $5,000 floor (Source: 26 U.S.C. § 164(b)(7)). The MFS amounts are consistently set at half of the single or joint figures throughout the schedule.
Sources
26 U.S. Code § 164 (state and local tax deduction, including § 164(b)(7) cap, phase-down, and reversion): https://www.law.cornell.edu/uscode/text/26/164
26 U.S. Code § 68 (overall limitation on itemized deductions, as amended by Public Law 119-21): https://www.law.cornell.edu/uscode/text/26/68
Congressional Research Service, Report R48611, “Tax Provisions in P.L. 119-21, the FY2025 Reconciliation Law” (SALT cap $40,400 for 2026, 1% annual increase, phase-down, and 2030 reversion): https://www.congress.gov/crs-product/R48611
Congressional Research Service, Report R48571, “The Limitation on Itemized Deductions” (the 2/37 limitation for top-bracket taxpayers): https://www.congress.gov/crs-product/R48571
One Big Beautiful Bill Act, Public Law 119-21 (H.R. 1, 119th Congress), signed July 4, 2025: https://www.congress.gov/bill/119th-congress/house-bill/1
IRS Notice 2020-75 (deductibility of specified state and local income tax payments by pass-through entities): https://www.irs.gov/pub/irs-drop/n-20-75.pdf
IRS, “IRS releases tax inflation adjustments for tax year 2026” (2026 standard deduction; amendments from Public Law 119-21): https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
IRS, Revenue Procedure 2025-32: https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
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Disclaimer
This article is provided by Q3 Advisors for educational and informational purposes only. It is not tax, legal, or investment advice, and it is not a recommendation to take or refrain from any action. Q3 Advisors is a registered investment adviser; registration does not imply a certain level of skill or training. Tax figures are current as of August 2026 and may change with new legislation or IRS guidance. Individual circumstances vary; consult a qualified tax or financial professional before acting. Additional information about Q3 Advisors is available in its Form ADV.
