The $40,400 SALT Cap: Who Should Itemize Again — and the High-Income Phase-Down
The state and local tax deduction cap quadrupled, so many homeowners who switched to the standard deduction may want to itemize again. Here is how the 2026 cap works, where it phases down and how to decide.
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📐 Figures verified Sep 28, 2026 against IRS Publication 505 (2026), Public Law 119-21, IRS Revenue Procedure 2025-32 (2026 standard deduction), IRS Topic 503 on deductible taxes and Schedule A. SALT figures come from our figures registry. This is general information, not tax advice. How we check numbers →
For 2026, you can deduct up to $40,400 of state and local taxes if you itemize, up from $10,000 before 2025. Above $505,000 of modified AGI, the cap shrinks by 30% of the excess, never below $10,000. Homeowners in high-tax states with a mortgage are the likeliest to itemize again. Add up your deductions against the $32,200 joint standard deduction.
Numbers That Matter
| Figure | Amount | Source | Verified |
|---|---|---|---|
| SALT deduction cap, 2026 | $40,400 for itemizers | IRS Publication 505 | Sep 28, 2026 |
| High-income phase-down | Cap reduced by 30% of modified AGI over $505,000, but not below $10,000 | IRS Publication 505 | Sep 28, 2026 |
| 2026 standard deduction | $16,100 single, $32,200 married filing jointly | IRS Rev. Proc. 2025-32 | Sep 28, 2026 |
| Which taxes count | State and local income or sales taxes, plus real estate and personal property taxes | IRS Topic 503 | Sep 28, 2026 |
| Where you claim it | Schedule A (itemized deductions) | IRS | Sep 28, 2026 |
| The law | Public Law 119-21 raised the cap for 2025–2029; it returns to $10,000 in 2030 | GovInfo | Sep 28, 2026 |
What Changed
From 2018 through 2024, state and local tax deductions were capped at $10,000, which pushed many homeowners to the standard deduction. Public Law 119-21 raised the cap to $40,000 for 2025, with small increases each year through 2029 ($40,400 for 2026), before it returns to $10,000 in 2030. The higher cap phases down for high earners.
The High-Income Phase-Down
If your modified AGI is over $505,000, subtract 30% of the excess from the $40,400 cap, but the cap never falls below $10,000. For 2026, that floor is reached at about $606,333 of modified AGI, so the benefit of the higher cap is concentrated in the $505,000-and-under group.
Should You Itemize Again?
- Add up your state and local taxes: income or sales tax, plus property taxes, up to the cap.
- Add mortgage interest, charitable gifts above 0.5% of AGI (the new floor from 2026) and medical costs above 7.5% of AGI.
- Compare the total with your standard deduction: $16,100 single or $32,200 joint for 2026 (more if you're 65 or older).
- Itemize if it's bigger, and remember the new senior, tips, overtime and car-loan interest deductions apply either way.
Business owners may still benefit from state pass-through entity tax elections, which several states offer as a way around the individual cap.
Worked Example: A Couple in a High-Tax State
- Deductions: $18,000 of state income tax and $12,000 of property tax ($30,000 of SALT, under the cap), $14,000 of mortgage interest and $4,000 of gifts ($2,750 after the 0.5% floor) total $46,750.
- Versus the standard deduction: that's $14,550 more than $32,200, saving about $3,492 in the 24% bracket. Under the old $10,000 cap, their itemized total would have been $28,000, so they'd have taken the standard deduction.
- A high earner: at $560,000 of modified AGI, the cap falls to $23,900.
Savings use a single marginal rate for simplicity; your return may differ.
Decision Rules
If this, then that
- If you took the standard deduction under the old cap → recheck; the higher cap may make itemizing worth it again.
- If your income is just over $505,000 → estimate the phase-down; timing income can matter.
- If you pay estimated state taxes → deductions count in the year you pay them, within the cap.
- If you own a pass-through business → ask about your state's pass-through entity tax.
- If you're planning past 2029 → remember the cap is scheduled to return to $10,000 in 2030.
Mistakes to avoid
- Assuming you should keep taking the standard deduction out of habit.
- Deducting both state income and sales taxes; you choose one.
- Forgetting the new 0.5% floor on charitable gifts for itemizers.
- Ignoring the phase-down if your income is over $505,000.
- Planning on the higher cap lasting beyond 2029.
Related: the senior deduction applies whether or not you itemize; 2026 tax changes lists everything new; no tax on tips covers another new deduction; and tax planning covers year-round strategy.