SALT Deduction Cap Set at 40,400 Dollars for 2026 Tax Year
The IRS has confirmed the state and local tax deduction limit for the 2026 tax year is $40,400, up from the $10,000 cap that was in place since 2017. The change affects millions of taxpayers in high-tax states including New York, California, and New Jersey.
The IRS has confirmed that the state and local tax (SALT) deduction cap for the 2026 tax year is set at $40,400, a significant increase from the $10,000 limit that had been in place since the 2017 Tax Cuts and Jobs Act.
The higher cap was included in legislation passed earlier this year and applies to individual filers. Married couples filing jointly face a cap of $80,800.
The change is expected to benefit millions of taxpayers in high-tax states, particularly New York, California, New Jersey, and Illinois, where state income and property taxes frequently exceed the old $10,000 limit. Under the previous cap, many middle- and upper-middle-income homeowners in those states were unable to deduct the full amount of their state and local taxes.
Tax professionals say the new limit will reduce federal tax liability for a large number of filers who itemize deductions. However, they note that many taxpayers still take the standard deduction, which means the SALT change will not affect everyone.
The Tax Policy Center estimates that the higher SALT cap will reduce federal revenue by approximately $180 billion over 10 years. Critics of the change argue it disproportionately benefits higher-income households, since lower-income taxpayers are less likely to itemize.
Supporters, including many members of Congress from high-tax states, argued that the old $10,000 cap amounted to double taxation and unfairly penalized residents of states with higher costs of living.
Taxpayers who plan to itemize deductions for 2026 should consult a tax professional to determine how the new SALT limit affects their specific situation.
