Introduction
The federal SALT deduction changed in 2025, and many itemizers haven't caught up. Tax year 2026 is the year you'll report on a return generally filed in 2027, and the rules for it differ from what you may remember.
Common questions come up fast. Who can claim SALT? Which taxes count? How does MAGI shrink the cap? Where does it land on Schedule A?
This guide draws on enacted federal law (Public Law 119-21) and IRS instructions. Your result still depends on filing status, income, state rules, and total itemized deductions. Treat it as general information, not individual tax advice.
Key Takeaways
- SALT is an itemized deduction on Schedule A, so you can't combine it with the standard deduction.
- The 2026 cap is $40,400 ($20,200 if married filing separately), before any income reduction.
- Above $505,000 of MAGI ($252,500 MFS), the cap shrinks by 30% of the excess, down to a $10,000 floor.
- Choose income or sales tax, add property taxes, then apply the cap.
What Is the 2026 SALT Deduction Cap?
What does SALT include?
SALT means state and local taxes you pay personally. Eligible categories are:
- State and local income taxes, or general sales taxes (you pick one, never both)
- State and local real estate taxes
- State and local personal property taxes
Foreign real property taxes are excluded from the personal itemized deduction.
What does the SALT cap limit?
The cap applies to the combined total of these taxes. It isn't a separate allowance per tax type. If you pay $30,000 in income tax and $20,000 in property tax, the cap applies to the $50,000 total.
Taxes tied to a trade or business, or to an income-producing activity under section 212, follow different rules and aren't limited the same way. Rental and business owners should review those schedules rather than assume Schedule A applies.
How did the cap change for 2025 and 2026?
Public Law 119-21, enacted July 4, 2025, amended IRC 164(b)(6). The statute sets the following amounts:
| Period | Cap (other than MFS) | MFS cap |
|---|---|---|
| Before the change | $10,000 | $5,000 |
| 2025 | $40,000 | $20,000 |
| 2026 | $40,400 | $20,200 |
| 2027-2029 | 101% of prior year | Half the cap |
| 2030 onward | $10,000 | $5,000 |
The annual adjustment is a fixed 1% increase, not an inflation-based one. These are ceilings, not guaranteed deductions.
How the 2026 SALT Cap Is Calculated
Determine whether itemizing is beneficial
Compare total itemized deductions (SALT, mortgage interest, charitable gifts, eligible medical expenses) with your standard deduction. The 2026 basic amounts under Rev. Proc. 2025-32 are:
| Filing status | Standard deduction |
|---|---|
| Single | $16,100 |
| Married filing jointly | $32,200 |
| Married filing separately | $16,100 |
| Head of household | $24,150 |
A deduction lowers taxable income, not tax directly. The real saving equals the deduction times your marginal rate.
Calculate eligible SALT before the cap
Total your state and local income or sales taxes, real estate taxes, and value-based personal property taxes paid during the year. Timing matters:
- Cash-basis taxpayers deduct taxes in the year paid.
- Withholding and estimated payments count, but penalties and interest don't.
- Estimated payments need a reasonable, good-faith basis. An artificial payment expected to be refunded isn't deductible.
- Escrow deposits don't count. Only the tax the lender actually remits to the taxing authority does.
Apply the MAGI phase-down
MAGI here means AGI plus amounts excluded under sections 911, 931, or 933. For 2026, the starting SALT cap is $40,400 ($20,200 MFS). The phase-down threshold is $505,000 ($252,500 MFS). The cap drops by 30% of the excess, but never below $10,000 ($5,000 MFS), per Public Law 119-21.
Hypothetical example: A joint filer has MAGI of $550,000 and paid $45,000 in eligible taxes.
- Excess MAGI: $550,000 − $505,000 = $45,000
- Reduction: 30% × $45,000 = $13,500
- Reduced cap: $40,400 − $13,500 = $26,900
- Deduction: the smaller of $45,000 and $26,900, so $26,900
For MFS filers, the IRS worksheet starts from the full $40,400 amount, applies the reduction using the $252,500 threshold and the floor, and only then halves the result. Don't subtract 30% from a $20,200 starting figure.
Even with taxes above the cap, you may still claim less than the cap, or take the standard deduction, if total itemized deductions fall short.
How to Claim SALT on 2026 Schedule A (Form 1040)
The IRS lists the 2025 Schedule A as the current final version. A 2026 draft is marked not for filing, so confirm line labels and the worksheet in the final 2026 instructions before you file. Line numbers below match the final 2025 Schedule A.
| Line | Entry |
|---|---|
| 5a | State and local income taxes or general sales taxes |
| 5b | Real estate taxes |
| 5c | Personal property taxes |
| 5d | Total of 5a through 5c |
| 5e | Smaller of 5d or the cap (after MAGI worksheet) |
| 6 | Other taxes |
| 17 | Total itemized deductions, carried to Form 1040, line 12e |
Line 6 isn't an extra SALT allowance beyond line 5e.
Income or sales taxes (line 5a)
Pick one and check the sales-tax box if you choose that route. Sales-tax users can total actual receipts or use the optional tables and the IRS calculator.
Real estate taxes (line 5b)
Deductible real estate taxes are levied for the general public welfare at a uniform rate. Not deductible:
- Assessments for streets, sidewalks, or water/sewer improvements
- Water, sewer, and trash service charges
- Transfer taxes on your home
- HOA charges
Maintenance or interest portions of an assessment can sometimes qualify if separately stated.
Personal property taxes (line 5c)
The tax must be based only on value and imposed annually. IRS Publication 17 gives an example: a $32 vehicle registration fee with $15 based on a $1,500 value and $17 based on weight. Only the $15 is deductible.
Add and apply the cap
Add lines 5a to 5c, compare the total with your cap (reduced for MAGI if applicable), and enter the smaller figure on 5e. It flows into line 17 and then Form 1040.
Keep supporting records
Retain state tax statements, local tax bills, property tax receipts, personal property records, sales-tax receipts, and mortgage escrow statements. Confirm when your lender actually paid the tax, since the deposit date doesn't control.
Who Benefits Most from the Expanded SALT Cap?
Relief requires itemizing and enough eligible SALT to exceed the old $10,000 limit. Those most likely to gain:
- Homeowners with large property tax bills
- Residents of high-income-tax states
- Taxpayers whose itemized total already beats the standard deduction
IRS data for 2023, reported by the Congressional Research Service, showed 9% of returns itemized, and 99% of those included a SALT deduction. That is pre-expansion data, not a 2026 forecast.
CRS also notes SALT benefits generally accrue to higher-income taxpayers, though the MAGI phase-down limits the expanded cap for them. Taxpayers with modest SALT may find the standard deduction still wins.
Filing status, MAGI, mortgage interest, charitable giving, and the income-versus-sales-tax choice all shift the outcome. Rental and business owners should check their relevant schedules before applying personal rules.
Common Errors and a 2026 Planning Checklist
Mistakes to avoid
- Treating the cap as a separate allowance per tax type
- Deducting both income and sales taxes
- Claiming SALT while taking the standard deduction
- Overlooking the MAGI phase-down or section 911/931/933 add-backs
- Counting escrow deposits, service charges, or weight-based fees
- Using the 2025 cap for 2026 (or the reverse)
If you already filed with one of these errors, amended returns have deadlines too. File Form 1040-X within 3 years of filing the original return or 2 years of paying the tax, whichever is later, per the Form 1040-X instructions.
Planning checklist
- Gather tax statements and receipts early.
- Calculate both itemized and standard deductions.
- Confirm the final 2026 Schedule A instructions.
- Check your state's own treatment.
When to get help
These situations often need specialist review:
- Multi-state income
- Pass-through ownership interests
- Foreign investors and cross-border matters
- Overlap between business and personal taxes
VJM Global provides U.S. Form 1040 support, with pricing quoted by entity structure and service scope, along with cross-border accounting and international tax planning. This article isn't individualized advice.
Frequently Asked Questions
What is the IRS SALT cap for 2025?
The 2025 cap is $40,000, or $20,000 if married filing separately. The 2026 cap is $40,400 ($20,200 MFS). Either may be reduced if MAGI exceeds the threshold.
What are the tax deduction tables for 2026?
SALT limits, standard deduction amounts, and rate tables are different things. Rev. Proc. 2025-32 publishes the 2026 standard deductions and rate tables, so use current IRS publications for complete figures.
What is the standard deduction for seniors over 65 in 2025?
The additional amount for age 65 or older is $1,600, or $2,000 if unmarried and not a surviving spouse. Blindness adds a separate amount. Add it to your base deduction before comparing with itemizing.
What are some things I can claim as tax deductions?
Itemizers can claim eligible SALT, mortgage interest, charitable contributions, and qualifying medical expenses. Deductions reduce taxable income, credits reduce tax owed, and above-the-line deductions reduce AGI.
What are the capital gains tax brackets for 2025?
They're separate from SALT. For 2025, a single filer's 0% rate applies up to $48,350 of taxable income and 15% up to $533,400. Capital gains can raise your MAGI, which may reduce your SALT cap.
