Definition
The itemized deduction for state and local taxes, such as income or sales tax and property tax, which is capped at $40,400 for 2026.
What it means
The state and local tax (SALT) deduction lets people who itemize subtract state and local income taxes, or sales taxes instead, plus property taxes. A 2017 law capped it at $10,000. A 2025 law raised the cap to $40,000 for 2025 and $40,400 for 2026, with small increases through 2029, and the cap returns to $10,000 in 2030. For married people filing separately the cap is half. For 2026, the cap is reduced for taxpayers with modified AGI above $505,000 ($252,500 if married filing separately), but not below $10,000. The deduction only helps if your total itemized deductions are larger than your standard deduction. Taxes paid by a business on business property are handled separately from this personal limit.
Example
A couple with $18,000 of state income tax and $25,000 of property tax paid $43,000 in 2026. With MAGI under $505,000, they can deduct $40,400 if they itemize.
Illustrative numbers only. Your situation will differ.