Definition
The yearly limit on deducting state and local taxes (SALT), including property taxes: $40,400 in 2026 ($20,200 if married filing separately).
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The cap covers property tax plus state income or sales tax, combined. The 2025 federal tax law raised it from $10,000 to $40,000 for 2025, rising 1% a year through 2029 ($40,400 in 2026). It shrinks when modified adjusted gross income is over $505,000 in 2026 ($252,500 if married filing separately), but not below $10,000 ($5,000 if married filing separately), and it returns to $10,000 ($5,000) in 2030.
Pro Tip
SALT cap disproportionately affects high-tax states; may influence location decision for investors.
Example
A couple with $8,000 of property tax and $5,000 of state income tax can deduct all $13,000 in 2026 if they itemize; under the old $10,000 cap, $3,000 of it was lost.