The state & local tax (SALT) deduction cap jumped to $40,400 for 2026 (up from $10,000). See how much of your state, local and property taxes you can now deduct — and the extra benefit vs the old cap. ✓ 2026 IRS figures
2026 $40,400 limit • Itemizers
The One Big Beautiful Bill raised the state and local tax (SALT) deduction cap from $10,000 to $40,000 in 2025 and $40,400 in 2026, indexed through 2029 before reverting to $10,000 in 2030. SALT includes state/local income (or sales) tax plus property tax. It's an itemized deduction, so it only helps if your total itemized deductions beat the standard deduction ($16,100 single / $32,200 joint in 2026).
For high earners, the higher cap phases down by 30% of modified AGI above roughly $505,000, never falling below $10,000. The big winners are homeowners in high-tax states who previously lost most of their SALT deduction. This is an estimate, not tax advice.
The state and local tax deduction lets itemisers deduct state income or sales tax plus property tax, subject to a cap introduced in 2017 that fundamentally changed the arithmetic of itemising. Because the cap is a flat dollar limit while the standard deduction is large, most taxpayers in high-tax states now find their capped SALT plus mortgage interest and charity still falls short of the standard deduction — so they take the standard deduction and their state taxes produce no federal benefit at all. You must also choose between deducting state income tax OR state sales tax, never both.
SALT deductible = min(state income OR sales tax + property tax, cap)Total itemised = SALT + mortgage interest + charitable + otherItemise only if total itemised > standard deductionBenefit = (itemised − standard) × marginal ratewhere:
Assumptions: Property tax on a personal residence counts; taxes on rental property are deducted on Schedule E instead and are not subject to the SALT cap. Several states have created pass-through entity workarounds for business owners.
Work out how much of a high state tax burden actually produces a federal benefit.
Result$10,000 of $23,000 deductible — itemising saves $2,640
Without the mortgage interest, total itemised deductions would be $14,000 — below the $15,000 standard deduction — so the entire $23,000 of state tax would produce no federal benefit whatsoever. That is the position most renters in high-tax states are now in.