SALT deduction cap: $40,000 for 2025, $40,400 for 2026

The limit, year by year

Four times the old $10,000 cap, until 2030.

The 2025 tax law, Public Law 119-21, replaced the $10,000 cap on deductible state and local taxes with a larger, scheduled one. Married people filing separately get half of each figure.

The IRS instructions for the 2025 Schedule A carry the new figures; the statute sets the 2026 amounts and the return to $10,000 directly.

Above $500,000, the cap shrinks

30 cents of cap for each dollar over the threshold, never below $10,000.

The cap is reduced by 30% of the amount by which your modified adjusted gross income exceeds the threshold, but never below $10,000 ($5,000 married filing separately). Modified AGI is your adjusted gross income plus any foreign earned income, Puerto Rico income, or U.S. possession income you excluded. The IRS State and Local Tax Deduction Worksheet does it in four steps: subtract the threshold from MAGI, multiply by 0.30, subtract the result from the cap, and keep the larger of that figure or $10,000.

For 2026 the same arithmetic starts from $40,400 at $505,000, so the cap reaches the $10,000 floor at about $606,333.

Which taxes count toward it

Income or sales tax, plus property taxes, added together.

On Schedule A, the cap applies to the total of three lines:

• Line 5a: state and local income taxes — or, if you elect it, state and local general sales taxes instead. You cannot deduct both.
• Line 5b: state and local real estate taxes.
• Line 5c: state and local personal property taxes, but only those based on value alone and charged yearly. If part of a car registration fee is based on the car’s value, only that part counts.

The smaller of that total and your cap goes on line 5e. Some payments never count, cap or no cap: the IRS instructions exclude, among others, gasoline taxes, car inspection fees, assessments for sidewalks or other improvements, license fees such as marriage, driver’s, and pet licenses, and foreign real or personal property taxes.

The cap only matters if you itemize

Compare your total with the standard deduction first.

The SALT deduction is an itemized deduction. It helps only when your itemized total — SALT within the cap, plus mortgage interest, charitable gifts, and other Schedule A items — is larger than your standard deduction (before any additional amount for age or blindness):

An illustrative 2026 joint return: $9,500 of property tax and $13,000 of state income tax make $22,500 of SALT, well under the cap. With $11,500 of mortgage interest, the itemized total is $34,000 — $1,800 more than the $32,200 standard deduction. Under the old $10,000 cap, the same household could have itemized only $21,500 and would have taken the standard deduction instead.

Married filing separately halves everything

Half the cap, half the threshold, half the floor.

On separate returns, each spouse gets half the cap — $20,000 for 2025 and $20,200 for 2026 — and the reduction starts above half the threshold, $250,000 for 2025. The floor is $5,000. In the IRS worksheet the halving comes last: the reduction is figured against the full $40,000 using the $250,000 threshold, the $10,000 floor is applied, and the result is cut in half. A spouse with $300,000 of MAGI in 2025 ends up with a $12,500 cap.

Whether separate returns save anything overall depends on much more than SALT, so compare both ways before choosing.

What the deduction is worth

A deduction lowers taxable income, not tax, dollar for dollar.

A deduction reduces the income that is taxed, so its value is the deduction times your marginal tax rate. If itemizing adds $1,800 of deductions for a household in the 22% bracket, its federal income tax falls by about $396. The calculator above shows the deduction and the itemizing margin, not the tax saved. State income tax returns follow their own rules.

For the other new deductions in the same law, see no tax on overtime and the senior deduction.