Definition
The SALT deduction allows itemizing taxpayers to deduct eligible state and local taxes, subject to an annual cap and income-based phase-down rules.
How It Works
For 2026, the SALT cap is $40,400. The increased cap begins phasing down when modified AGI exceeds $505,000, with the cap reduced by 30% of income above that threshold. The deduction cannot be reduced below the $10,000 floor, and around $606,333 MAGI the taxpayer is effectively back to the $10,000 cap.
Example
A homeowner in New York paying $40,000 in combined state income and property tax can deduct only $10,000 of it.
Who It Applies To
Itemizers, especially in high-tax states.
Watch-Outs
Many high-income households may receive limited benefit from the increased cap because of the phase-down. State taxes, property taxes, filing status, AMT exposure, and itemized deduction levels all affect the actual benefit.
