SALT deduction cap for 2026: $40,400

The cap is the same for single and joint filers, so a married couple gets $40,400 for 2026, not double.

The cap drops by 30% of modified AGI above the threshold, but never below $10,000 ($5,000 married filing separately).

Example: a couple with 2026 modified AGI of $555,000 is $50,000 over $505,000. Their cap falls by $15,000, to $25,400. At about $606,333 of modified AGI the cap reaches the $10,000 floor.

State and local income taxes, or general sales taxes instead (not both); real estate taxes; and personal property taxes based on value, such as some car registration fees. Gas taxes, inspection fees and special assessments for sidewalks or improvements do not count.

Taxes paid in a business, such as property tax on a rental or on business property reported on Schedule C or E, are deducted there and are not subject to the cap.

The 2026 standard deduction is $32,200 for a joint return and $16,100 for a single filer. The SALT deduction only helps if your itemized deductions, SALT plus mortgage interest, charity and the rest, add up to more than that.

Example: a Naperville couple pays $12,000 of Illinois income tax and $11,000 of property tax. Under the old cap they could deduct $10,000; for 2026 they can deduct all $23,000. With $14,000 of mortgage interest their itemized deductions reach $37,000, above the $32,200 standard deduction, so itemizing now saves them tax where it used to make no difference.

Since 2020 the IRS has allowed partnerships and S corporations to deduct state income tax that the business itself pays under an elective state pass-through entity tax, outside the individual cap (Notice 2020-75). Illinois has offered an elective 4.95% pass-through entity tax for tax years ending on or after December 31, 2021.

With the cap now much higher, the election matters mainly to owners above the phase-down range or with large state taxes. Whether it still pays for 2026 is worth checking with your preparer before year-end.