SALT Tax Changes Coming in 2026

The federal government passed a short-term expansion of the SALT tax deduction that will change planning for many filers. The headline: the cap rises from $10,000 to $40,000 for returns starting in 2025. It then goes up 1% each year through 2029 and snaps back in 2030 unless Congress changes it.

People in high-tax states, homeowners with large property bills, and higher earners should review options. The higher cap phases out between MAGI $500,000 and $600,000 (MFS $250,000–$300,000). At $600,000 and above, the cap drops back to $10,000.

Starting in 2026, those in the top bracket will have itemized deductions capped at 35% of value. That matters along with the cap change. Many taxpayers who stopped itemizing after 2017 may now recheck standard vs. itemized.

This guide explains the deduction, the cap math and phase-outs, filing-status impacts, and practical steps for 2026–2029.

What is salt tax deduction?

First things first: SALT stands for State and Local Taxes. The salt tax deduction lets you write off what you’ve paid in property taxes, state income taxes, and sometimes sales taxes from your federal return.

Before 2018, the deduction was unlimited. Then Congress put a salt cap tax of $10,000 in place, which hit folks in states like New York, California, and New Jersey especially hard.

So when people ask “what is salt tax deduction?” it’s basically the ability to lower your taxable income by subtracting the state and local taxes you already paid. Without it, you’re kind of being taxed twice.

How the Salt Cap Works

Here’s the kicker: no matter how much you pay in property or state taxes, you can only deduct up to the cap. Right now, that cap is $10,000 for most filers.

Year SALT Deduction Cap Notes 2017 and before Unlimited Deduct full state/local tax 2018–2024 $10,000 Cap under Tax Cuts and Jobs Act 2025 (proposed) $40,000 Temporary expansion, then phase out

This is where talk of a salt tax repeal comes in. Some lawmakers want to raise or eliminate the cap, while others argue it mostly helps wealthy taxpayers.

SALT Deduction 101: Why 2026 Matters

Recent law gives more room to deduct state and local taxes for 2025–2029. Quick answer what is salt tax deduction? It lets you deduct certain state and local taxes on your federal return, up to a cap. In simple terms, It’s state and local tax that may be deductible at the federal level. These changes can boost your salt deduction during the 2025–2029 window.

What Counts as SALT?

State and local taxes include state income taxes, an optional sales-tax election, and property taxes. Some filers choose the sales-tax option when it gives a bigger break, which is common in states with no income tax. These payments count toward your salt tax deduction and are subject to the salt cap tax limit each year.

Who Benefits from Salt Deduction?

Not everyone feels the pain (or joy) of the salt deduction. If you live in a low-tax state, the cap may not affect you at all. But if you’re in places like New Jersey or California, where property taxes alone can hit $15,000+, you’re leaving money on the table.

So yes, the salt tax deduction is especially valuable if you’re a homeowner in a high-tax state. If you’re renting in Texas? Probably not as big a deal.

Filing Status and the SALT Deduction

• Single Filers If you make less than $500,000 MAGI, you can usually use the full SALT cap. In high-tax states, single filers with big property or state tax bills may get more out of itemizing.

• Married Filing Jointly Couples share the same cap, but their combined income can push them into the $500,000–$600,000 phase-out. Even then, mortgage interest, charitable gifts, or medical bills may help them beat the standard deduction.

• Married Filing Separately Separate filers get only half the cap and face lower phase-out levels ($250,000–$300,000). In 2030, their cap drops back to $5,000, which makes this choice harder to benefit from unless state rules make it worthwhile.

Quick Tip Always compare your itemized deductions with the standard deduction. If itemizing saves more, take it. Also check your withholding or estimated payments so you don’t get caught short at tax time.

Planning Moves for 2026–2029

A targeted mix of pre-tax contributions and income timing can lower your taxable income and protect more of the enhanced deduction cap during the 2026–2029 window.

Retirement, HSAs, and Deferred Comp

Max out pre-tax workplace retirement plans and deductible traditional IRAs when eligible. These contributions reduce adjusted gross income and can keep you below phase-out thresholds.

HSAs offer a triple tax advantage: contributions reduce income, grow tax-free, and pay for qualified medical costs tax-free. For those with high-deductible plans, HSAs also act as a flexible emergency and retirement vehicle. use our retirement calculator and run your own numbers

High earners should evaluate nonqualified deferred compensation (NQDC) to shift pay into years after 2029. Deferral can lower current-year MAGI and reduce the chance of losing part of the enhanced cap.

Extra Deductions

Through 2028, eligible people above 70 can claim an extra deduction ($6,000 per qualified person) that phases out above set income limits. Combine this with age-based add-ons to boost itemized totals when appropriate.

• Accelerate deductible expenses into years you will itemize, or defer income to remain under the $500,000 threshold.
• Protest property valuations and confirm exemptions to lower property bills and strengthen the itemize vs. standard deduction decision.
• Revisit withholding and estimated payments after large pre-tax contributions to avoid underpayment penalties.

Conclusion

Run the playbook: total your state local taxes and property taxes under the year’s deduction cap, then compare that figure to the standard deduction before filing. Model scenarios for single filers, married couples filing jointly, and those filing separately.

Use practical steps: bunch gifts, time charitable donations into a donor-advised fund, track medical costs above 7.5% of AGI, and consider PTET where available. Manage income and deferrals to protect taxable income from phase-outs.

Remember the 2030 reversion risk. Keep records, challenge local valuations, and consult a qualified advisor to align state and federal moves with long-term goals.

FAQ

Will the SALT deduction expansion apply to AMT (Alternative Minimum Tax) filers?

The SALT deduction is generally disallowed under AMT rules. Even with the temporary expansion, those subject to AMT usually won’t benefit from the higher cap. It’s important to calculate both regular and AMT liability.

Does the higher SALT cap affect my ability to claim mortgage interest or charitable deductions?

No. The SALT deduction has its own cap. Mortgage interest, charitable contributions, and medical expenses remain separate categories that can still be itemized alongside SALT, subject to their own rules.

Can renters benefit from the SALT deduction expansion?

Usually not directly, since renters don’t pay property tax. However, if they live in a state with high income or sales taxes, they may see some benefit if their itemized deductions exceed the standard deduction.

Do states adjust their tax laws based on the SALT cap?

Yes, some states introduced workarounds (like Pass-Through Entity Taxes) to restore federal deductibility for business owners. Others may not make changes, so the benefit depends heavily on where you live.

What happens if Congress extends or repeals the cap again?

The law is set to snap back in 2030, but tax policy is political. Lawmakers could extend the higher cap, lower it, or repeal it altogether. Taxpayers should treat 2025–2029 as temporary and stay flexible.

How do retirement accounts and HSAs help with planning?

Traditional retirement contributions and HSA deposits reduce current taxable income, potentially keeping taxpayers below phase-out thresholds and increasing the value of available deductions during the expanded window.