SALT Cap 2026: $40,400 Limit, Phase-Down, Schedule A

The state and local tax (SALT) deduction lets you subtract some state and local taxes on your federal return. A federal law sets a limit on how much you can subtract. This post covers tax year 2025 and tax year 2026. Tax year 2026 returns are filed in 2027. IRS: Publication 17

The limit for 2025 and 2026

For tax year 2025, the overall limit is $40,000, or $20,000 if you are married filing separately. For tax year 2026, the limit is $40,400, or $20,200 if you are married filing separately. IRS: Instructions for Schedule A (2025) IRS: Publication 505 (2026)

Before the 2025 law, the limit was $10,000 for most years since 2018. The law raised the cap. For tax years after 2026 and before 2030, the cap rises by 1% each year. For tax years beginning in 2030, the cap returns to $10,000. Internal Revenue Code section 164(b)(7)

The income phase-down

If your income is high, the cap gets smaller. The measure is your modified adjusted gross income (MAGI). For most filers, this is the amount on Form 1040, line 11b. The threshold is $500,000 for 2025 and $505,000 for 2026. If you are married filing separately, the threshold is half of that amount.

For each dollar of MAGI above the threshold, the cap drops by 30 cents. The cap never drops below $10,000, or $5,000 if you are married filing separately. IRC section 164(b)(7) IRS: correction to the 2026 Form 1040-ES

Here is an example for 2026. A married couple filing jointly has MAGI of $555,000. That is $50,000 over the $505,000 threshold. The cap drops by $15,000, which is 30% of $50,000. Their limit is $25,400. A single filer with MAGI of $650,000 is $145,000 over the threshold. The reduction would be $43,500. That is more than the gap between $40,400 and $10,000, so the limit is $10,000. For single and joint filers in 2026, the cap reaches the $10,000 floor at about $606,333 of MAGI.

What counts toward the cap

The cap applies to three kinds of tax. On Schedule A, they go on lines 5a, 5b, and 5c. The total of those lines is then limited on line 5e.

State and local income taxes (line 5a). This includes income tax withheld from your pay, as shown on your Form W-2. It also includes estimated tax payments you made in 2025, and any balance you paid in 2025 for an earlier year. Do not include penalties or interest.
General sales taxes (line 5a, instead of income tax). You can choose to deduct sales taxes instead of income taxes, but not both. You can use your actual receipts or the IRS optional tables. The IRS Sales Tax Deduction Calculator can help.
Real estate property tax (line 5b). This is tax on property you own that is not used for business, such as your home. You count taxes you paid during the tax year, not taxes billed for a later year.
Personal property tax (line 5c). This applies only to yearly taxes based on the value of an item, such as the value-based part of a yearly car registration bill.

Some amounts do not count. These include federal income tax, payroll taxes, and charges for a marriage, driver's, or pet license. If you received a refund or rebate of a tax you deducted, you may need to reduce your deduction. IRS: Instructions for Schedule A

Itemizing or the standard deduction

Only people who itemize can claim the SALT deduction. To itemize, you list your deductions on Schedule A (Form 1040). If you do not itemize, you take the standard deduction. You use whichever amount is larger. The IRS says that in most cases, the larger amount gives the lower federal tax. IRS: Instructions for Schedule A (2025)

For 2026, the standard deduction is $16,100 for single or married filing separately, $24,150 for head of household, and $32,200 for married filing jointly. IRS: Publication 505 (2026)

Here is a simple example. A married couple filing jointly for 2026 has $38,000 of SALT, which is under the cap. They also have $12,000 of mortgage interest and no other itemized deductions. Their total is $50,000. That is more than the $32,200 standard deduction, so itemizing may lower their tax. If their total were only $25,000, the standard deduction would be the better choice. Other items, such as charitable gifts and medical costs, can add to the total. Each item has its own rules.

Steps to check

Find your MAGI, usually the amount on Form 1040, line 11b.
Add the state and local income or sales tax, real estate tax, and personal property tax you paid in the tax year.
Apply the limit for your filing status and tax year.
Compare your total itemized deductions with the standard deduction.
Keep your W-2s, property tax bills, and state payment records.

General information, not advice for your return.

Sources: IRS Publication 17 (https://www.irs.gov/publications/p17); IRS Instructions for Schedule A (Form 1040), 2025 (https://www.irs.gov/instructions/i1040sca); IRS Publication 505, 2026 (https://www.irs.gov/ht/publications/p505); IRS correction to 2026 Form 1040-ES SALT reminder (https://www.irs.gov/forms-pubs/correction-to-state-and-local-income-tax-deduction-amount-in-the-2026-form-1040-es); IRC section 164(b)(6)-(7) (https://uscode.house.gov/us/usc/119-121/t26/s164/); IRS Sales Tax Deduction Calculator (https://www.irs.gov/SalesTax) This is general information, not advice about your specific return.

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