What the SALT deduction is and how the cap works
The state and local tax deduction, commonly called SALT, allows taxpayers who itemize their deductions to deduct state income taxes, local income taxes, and property taxes paid during the year. Before 2017, there was no cap on this deduction. The Tax Cuts and Jobs Act imposed a $10,000 cap starting in 2018.
For homeowners in states like California, New York, New Jersey, and Illinois, the $10,000 cap was a significant tax increase. A homeowner paying $8,000 in property taxes and $15,000 in state income taxes previously could deduct $23,000. Under the TCJA cap, they could only deduct $10,000.
The One Big Beautiful Bill Act raised the cap to $40,000 for tax years 2025 through 2029. The cap increases by 1% per year through 2029. For most homeowners in high-tax states, the new cap is large enough to cover their actual state and local tax payments.
Who benefits most from the higher cap
The homeowners who benefit most are those in high-tax states who pay more than $10,000 in combined state income taxes and property taxes. This is common in California, New York, New Jersey, Connecticut, Massachusetts, and Illinois.
A homeowner in New Jersey paying $12,000 in property taxes and $18,000 in state income taxes has $30,000 in SALT payments. Under the old $10,000 cap, they could only deduct $10,000. Under the new $40,000 cap, they can deduct the full $30,000 — a $20,000 increase in deductions.
However, the deduction only helps if you itemize. If your total itemized deductions — including SALT, mortgage interest, and charitable contributions — do not exceed the standard deduction ($16,100 for single filers, $32,200 for married filing jointly in 2026), you will still take the standard deduction and the SALT cap change will not affect your tax bill.
The income phase-down and who it affects
The $40,000 SALT cap phases down for taxpayers with modified adjusted gross income above $500,000. Above that threshold, the cap is reduced. This phase-down was designed to limit the benefit for the highest earners.
For the vast majority of homeowners, the phase-down does not apply. A household earning $200,000 in a high-tax state receives the full $40,000 cap benefit.
The cap also applies per return, not per person. A married couple filing jointly shares one $40,000 cap. Two single filers each have their own $40,000 cap.
What homeowners should review before filing
The first step is to add up your actual state and local tax payments for the year: state income tax withheld from your paycheck, any state income tax you paid directly, and property taxes paid on your primary residence and any other real property you own.
Then compare that total to the standard deduction for your filing status. If your SALT payments plus mortgage interest plus charitable contributions exceed the standard deduction, itemizing is likely beneficial. If not, the standard deduction is probably better.
Keep in mind that the mortgage interest deduction limit is now permanent under the One Big Beautiful Bill Act. Mortgage interest on loans up to $750,000 remains deductible for those who itemize.
RoboTax can connect to your accounts and organize your tax-related payments so a tax professional has a clear picture of your situation before you file. If you have not compared your itemized deductions to the standard deduction recently, this is a good year to do it.
Frequently asked questions
Does the $40,000 SALT cap apply to my 2025 taxes?
Yes. The $40,000 cap applies to tax years 2025 through 2029. You can claim up to $40,000 in SALT deductions on your 2025 return if you itemize.
Can I deduct both state income tax and property tax under the SALT cap?
Yes. The SALT cap covers the combined total of state income taxes, local income taxes, and property taxes. The $40,000 limit applies to the sum of all three.
I live in California. Will the higher SALT cap help me?
Likely yes, if you itemize. California has high state income taxes and property taxes. If your combined SALT payments exceed $10,000, the new $40,000 cap allows you to deduct more than before.
Do I need to itemize to claim the SALT deduction?
Yes. The SALT deduction is only available to taxpayers who itemize their deductions on Schedule A. If you take the standard deduction, you cannot claim SALT.
Sources and further reading
These resources are included for educational context. RoboTax is not tax, legal, or financial advice, and this content should be reviewed with a qualified tax professional before being used for filing decisions.