U.S. taxpayers who itemize deductions can claim up to $40,400 for state and local taxes for tax year 2026. The limit begins to phase down above $505,000 in modified adjusted gross income, while the standard deduction remains the better choice for many filers.
The state and local tax deduction, known as SALT, covers property taxes plus either state and local income taxes or sales taxes. Taxpayers cannot claim both income and sales taxes under this deduction. SALT is available to people who itemize, so filers compare their itemized expenses with the standard deduction and other eligible deductions.
The IRS set the 2026 standard deduction at $16,100 for single filers and $32,200 for married couples filing jointly. About 90% of taxpayers used the standard deduction for tax year 2023, the latest year cited in the CNBC report. The IRS has not yet released detailed information on SALT claims for 2025.
For 2026, the SALT cap is $40,400, or $20,200 for married people filing separately. The deduction starts to phase down when modified adjusted gross income exceeds $505,000. It falls to $10,000 for incomes of about $606,333 and above. IRS materials confirm these figures.
Financial professionals quoted by CNBC said taxpayers who usually fall just short of itemizing may want to review eligible deductions in advance. One option experts suggest considering is grouping eligible expenses into a single tax year. For example, homeowners with a property-tax assessment may be able to make a payment before year-end toward the next period. That depends on local rules and when the bill is issued. Taxpayers whose mortgage lenders manage payments through escrow may have less flexibility.
Deadlines for quarterly estimated state taxes on self-employment, small-business or investment income also vary. The federal deadline for fourth-quarter estimated tax is Jan. 15, 2027, though state due dates may differ.
Higher earners also face a gradual phase-down that experts call the “SALT torpedo.” The deduction can shrink as income rises, even when other circumstances do not change. A taxpayer’s result depends on income, filing status and other deductions. The rules apply to tax year 2026, with returns generally filed in 2027.