What is the SALT deduction cap for 2025 and 2026?
The cap on itemized state and local tax deductions is $40,000 for 2025 and $40,400 for 2026, half that for married filing separately. It shrinks by 30% of modified AGI above $500,000 in 2025 and $505,000 in 2026, but never below $10,000, and it drops back to $10,000 for years after 2029.
Sources checked . Current through .
The cap by year
| Taxable years beginning in | Cap | Phase-down starts at modified AGI of |
|---|---|---|
| 2025 | $40,000 | $500,000 |
| 2026 | $40,400 | $505,000 |
| 2027 to 2029 | 101% of the prior year's amount | 101% of the prior year's amount |
| 2030 and later | $10,000 | no phase-down |
For a married person filing separately, both the cap and the phase-down threshold are half these amounts (IRC §164(b)(6)(B) and (7)(B)). The cap covers state and local income (or sales) taxes and property taxes combined. Foreign real property taxes don't count.
The phase-down
For taxable years beginning before 2030, the cap is reduced by 30% of modified AGI above the threshold, but not below $10,000. Modified AGI is AGI plus amounts excluded under IRC §§911, 931 and 933.
Example for 2026, single filer:
- Modified AGI of $555,000 is $50,000 over the $505,000 threshold.
- 30% of $50,000 is $15,000, so the cap is $40,400 − $15,000 = $25,400.
- The cap reaches the $10,000 floor once modified AGI passes about $606,333 ($505,000 + $30,400 ÷ 30%).
Business taxes are separate
The limit doesn't apply to state and local taxes paid in carrying on a trade or business or an activity under IRC §212, such as property taxes on a rental property reported on Schedule E.
Sources
- IRC §164(b)(7): Applicable limitation amount
- IRC §164(b)(7)(B): Phasedown based on modified adjusted gross income
Not tax advice. Check the sources against your client's facts before relying on this.