The 2026 SALT Cap Is $40,400 Until Income Passes $505,000

For tax year 2026 (the return you file in early 2027), the deduction for state and local taxes is capped at $40,400, and the cap shrinks by 30 cents for every dollar of modified adjusted gross income above $505,000 until it reaches a floor of $10,000. Section 70120 of the One Big Beautiful Bill Act wrote both numbers into 26 U.S.C. §164(b)(7). The cap applies to the combined total of state and local income taxes (or general sales taxes, if you elect them instead) plus real and personal property taxes.

Five caps in five years, then a permanent floor

The 2017 Tax Cuts and Jobs Act (§11042) imposed the first dollar limit on the deduction, $10,000 for tax years 2018 through 2025, and scheduled the limit to vanish in 2026. §70120 struck that expiration and replaced it with a schedule:

The 2027 through 2029 amounts are each 101 percent of the year before, compounding (§164(b)(7)(A)). The statute writes no rounding rule, which is why 2028 and 2029 land on cents ($41,212.04, then $41,624.16), and none of these figures is an inflation adjustment: Rev. Proc. 2025-32, the IRS list that sets the year's brackets and standard deduction, contains no SALT entry at all. Married filing separately, halve everything: for 2026 that is a $20,200 cap, a $252,500 threshold, and a $5,000 floor.

Thirty cents on the dollar above $505,000

The phase-down is one flat formula in §164(b)(7)(B): the cap falls by 30 percent of the excess of MAGI over $505,000, and it stops falling at $10,000. The 2026 raise over that floor is $30,400, and at 30 cents per dollar it takes $101,334 of income past the threshold to erase, so a filer at $505,000 of MAGI keeps the full $40,400 while a filer at $606,334 is back at $10,000. The 2025 arithmetic is rounder: a $40,000 cap phasing down from $500,000 reaches the floor at exactly $600,000.

MAGI here means adjusted gross income plus any foreign earned income or possessions exclusion under §911, §931, or §933; for a filer claiming none of those, it is plain AGI. The statute writes one threshold for everyone but separate filers: $505,000 whether you file single or jointly, with no doubled amount for couples.

Inside the band, the phase-down behaves like a surtax. An itemizer whose SALT bill exceeds the cap picks up $1.30 of taxable income per extra dollar earned: the dollar itself, plus 30 cents of lost deduction. A single filer is in the 35 percent bracket for the whole band ($256,225 to $640,600 of 2026 taxable income, per Rev. Proc. 2025-32); a joint filer crosses from 32 to 35 percent at $512,450. At 35 percent, 1.30 × 35% = 45.5 percent: earning $10,000 between $505,000 and $606,334 costs $4,550 of federal tax, where the same $10,000 outside the band costs $3,500.

Only itemizers see any of it

SALT is an itemized deduction, claimed on Schedule A, lines 5a through 5e; the 2025 instructions carry the phase-down as a worksheet on line 5e. The cap is worth nothing unless your itemized deductions together beat the standard deduction, which for 2026 is $16,100 for a single filer and $32,200 for a married couple filing jointly (Rev. Proc. 2025-32 §4.14).

That gate changes what the raise is worth. Take a married couple with $23,000 of state and local taxes and $14,000 of mortgage interest. Under the $10,000 cap they had $24,000 of itemized deductions, so they took the standard deduction and the SALT deduction did nothing for them. On the same facts in 2026 they itemize $37,000. The gain is measured against the standard deduction they would otherwise take: $37,000 − $32,200 = $4,800 of extra deductions, worth $1,152 in the 24 percent bracket. Real money, and much smaller than "the cap rose by $30,400" implies. When does itemizing beat the standard deduction works through the general case.

For the $65,000 single filer TaxMath uses as its reference case, nothing above moves: at that income, SALT plus mortgage interest rarely clears $16,100. The Tax Foundation projects about 14.2 percent of taxpayers itemizing in 2026 under the new cap, roughly one filer in seven.

Which states' bills outrun the old cap

A SALT bill is a state fact. Income tax rates below come from the TaxMath rate tables; property figures are the Tax Foundation's effective rates on owner-occupied housing for calendar year 2024.

New Jersey holds the country's highest effective property tax rate and a 10.75% top income tax rate besides. The Tax Foundation counts sixteen counties nationwide where the median property tax bill by itself exceeds $10,000, the entire old cap: eight are in New Jersey, and six more are Manhattan and its suburbs (Nassau, Suffolk, Westchester, Rockland, and Putnam), which is how New York fills the list from the 11th-ranked property rate. Its bills concentrate around one city.

Illinois runs against its own headline number: a flat 4.95% income tax, modest in this table, over the second-highest property rate in the nation, so an Illinois filer reaches the cap through the county assessor rather than the rate schedule. California inverts that. The highest top marginal income tax rate in the country, 13.30%, sits over a 0.70 percent property rate ranked 32nd; a large California SALT bill is an income tax bill, and Marin County is one of only two counties on the sixteen-county list outside the New York orbit.

Texas is the no-income-tax state the old cap still bound: at its 1.40 percent effective rate, seventh nationally, $10,000 of property tax corresponds to roughly a $715,000 house. Florida, at 0.78 percent with no income tax, mostly never touched the $10,000 cap, and for its typical homeowner the raise changes no return at all.

A provisional label in the last column means the state's 2026 law is known while its revenue department's official tables are pending; the live board is at 2026 data status.

After 2029, the floor has no expiration date

Had Congress done nothing, the cap would have lapsed for 2026 and the deduction would be unlimited again. §70120 chose the opposite ending: effective for taxable years beginning after December 31, 2024, the $40,000 cap already governs tax year 2025 returns (the ones filed in 2026), the $40,400 cap governs 2026, the 1 percent ratchet runs through 2029, and on January 1, 2030 the cap becomes $10,000 at every income, this time with no expiration attached. The five-year window is the temporary part; the floor is the law.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.