SALT Cap 2026: $40,400, the $505,000 Phase-Down and a Year-End Prepay

What the statute says

Section 70120 of Public Law 119-21 is titled “Limitation on individual deductions for certain state and local taxes, etc.” It strikes the old end date from section 164(b)(6) (“and before January 1, 2026”) and replaces the flat $10,000 with “the applicable limitation amount”, then defines that amount in a new section 164(b)(7). It applies to taxable years beginning after December 31, 2024. We read the section in the Government Publishing Office text of the law.

Source: Public Law 119-21 section 70120 (139 Stat. 169-170) in the GPO text, and the Instructions for Schedule A (Form 1040) 2025, read on October 28, 2026. The statute has no rounding clause in this section, so the 2027 to 2029 figures below are exact products of 101 percent; whether the IRS publishes them rounded is not verified.

The cap is a limit on one bundle: state and local income tax (or general sales tax, your choice), real estate tax and personal property tax. The 2025 Schedule A instructions say you enter the smaller of line 5d or $40,000 on line 5e when line 11b MAGI is $500,000 or less, and complete the State and Local Tax Deduction Worksheet above that. Its steps are the statute’s: start from the cap, subtract 30 percent of the excess, take the larger of the result or $10,000. We could not find the 2026 version of those instructions on October 28, 2026; the 2026 numbers here come from the statute.

How much can I deduct at my MAGI?

The table is our arithmetic from the statute. It shows the cap, not your deduction: you deduct the smaller of the cap and the SALT you actually paid. The cap is the same for single, joint and head of household filers; only a married person filing separately gets half. The script that produced every figure here is saved with our working papers.

Source: our arithmetic on IRC 164(b)(7). 2026 cap = $40,400 minus 30% of (MAGI minus $505,000), not less than $10,000. 2027 cap = $40,804 minus 30% of (MAGI minus $510,050), not less than $10,000.

Three points about the table. First, the cap reaches the floor at $606,333.33 in 2026: the $30,400 gap between $40,400 and $10,000 divided by 0.30 is $101,333.33, added to $505,000. In 2027 the same calculation gives $612,730. Second, the 2027 column is higher at every MAGI between the thresholds because both the cap and the threshold move up 1 percent, so a household whose income does not change gets $1,919 more room in 2027 inside the band. Third, nothing about the cap depends on filing status except the separate-return halves, so a single filer at $520,000 and a couple at $520,000 both have a $35,900 cap, while their ordinary tax brackets differ a lot.

Source: our arithmetic on IRC 164(b)(7)(A)(iii) and (B)(ii)(III), compounding 101 percent from the 2026 figures. The IRS has not published figures for 2027 to 2029 that we could read; the amounts are the statutory formula, unrounded.

What the band costs on the margin

While your SALT paid is above the cap, each additional dollar of MAGI inside the band does two things: it is taxed at your ordinary rate (if it is ordinary income) and it removes 30 cents of deduction, which is taxed at the same rate. The marginal rate on that dollar is therefore the bracket rate times 1.30 (our arithmetic).

Source: our arithmetic; bracket starts from Rev. Proc. 2025-32 section 4.01 (Table 1 for joint returns, Table 3 for unmarried individuals), read in the IRS PDF on October 28, 2026.

Two limits on that arithmetic. It applies only while the SALT you paid is above the cap; if you paid less than your reduced cap, extra MAGI costs you nothing in SALT deduction. And a separate rule in the same law, section 70111, reduces itemized deductions by 2/37 of the lesser of the itemized total or the taxable income above the start of the 37% bracket, for taxable years beginning after December 31, 2025 (new IRC section 68). We did not model it; if your taxable income is above $640,600 single or $768,700 joint it takes a further slice. The alternative minimum tax is also not modeled.

Should I prepay property tax before December 31, 2026?

The rule comes before the arithmetic. The 2025 Instructions for Schedule A say: “Only taxes paid in 2025 and assessed prior to 2026 can be deducted for 2025. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.” The same logic applies to 2026 and 2027. The IRS gave two examples in its December 27, 2017 advisory (IR-2017-210): a county that assessed on July 1 for July to June and billed two installments let a taxpayer pay the second installment in December and deduct it, while a county that offered a prepayment option for a year it had not yet assessed produced no deduction.

So there are four tests, and you need all of them:

1. You itemize. The 2026 standard deduction is $32,200 joint and $16,100 single (Rev. Proc. 2025-32 section 4.14). If your itemized total is below that, a prepayment changes nothing.
2. Your 2026 SALT is below your 2026 cap. Add state income tax withheld and paid (the instructions count state estimated payments made during the year), real estate tax and personal property tax, and compare with the table above for your MAGI. Room above that figure is worth nothing.
3. The bill was assessed before 2027. A payment to a county that has not yet assessed the next period is a deposit, not a tax.
4. The 2027 deduction it displaces would have been lost anyway. This is the one people miss. Paying in December what you would have paid in January moves a deduction from 2027 into 2026. You only come out ahead if your 2027 SALT would have been above the 2027 cap (so the dollars were being wasted), or if your 2027 MAGI is lower so the cap is bigger.

Source: our arithmetic from the cap formula above (2026 cap $40,400 and 2027 cap $40,804 at $450,000; $23,900 and $40,804 in case C); the rates are assumptions, not predictions. Case C runs the other way: when 2026 MAGI is in the band, SALT above the reduced cap is wasted, so the move is to shift payments into the lower-MAGI year. The tax value ignores the 2/37 rule, the alternative minimum tax and any change in bracket between the years.

For a retiree the practical reading is this. If your MAGI is below $505,000 and your SALT is below $40,400 in both years, a prepayment is a timing move and it can cost you in a year when you would be near the standard deduction. If property tax plus state income tax puts you over the cap in a normal year, there is no room to prepay. The cases where the move pays are narrower: a one-off 2027 bill, a 2026 gain or Roth conversion that lifts MAGI into the band while 2027 will be quieter, or a plan to bunch deductions every other year around the standard deduction. Roth conversions, the sale of a rental and a K-1 can all lift MAGI; our Roth conversion guide and rental income guide cover how each reaches adjusted gross income.

State income tax is the easier lever

Payments of state estimated income tax are deductible in the year paid. The 2025 instructions list “State and local estimated tax payments made during 2025” among the amounts for line 5a. So the fourth-quarter estimate that is usually due in January can be paid on or before December 31 and counted in 2026, with the same four tests. Do not skip the federal side: our Form 2210 guide and the estimated payments guide cover the January 15, 2027 federal installment. A state refund of tax you deducted can be taxable the next year (the instructions say a refund of an earlier year’s tax is included in income to the extent it reduced your tax).

Property tax calendars differ by place

We searched county and state pages for the dates below on October 28, 2026. They are examples of why the assessment test is local, not a statement about your bill.

Source: Cook County Treasurer news release (August 2026); Hillsborough, Palm Beach, Volusia, Sarasota and Charlotte county tax collector pages; Hays, Gregg and Tarrant county pages; Sonoma, Tulare and Merced county pages; Newark, Wallington and Midland Park, New Jersey; the town of Dedham, Massachusetts. Due dates change by year and by place. The right-hand column is our reading, not the IRS’s, and not advice about your return.

The 2027 change and the 2030 cliff

Two things move in January. The cap and the threshold each rise 1 percent, so a household at $520,000 of MAGI has $37,819 of cap in 2027 against $35,900 in 2026 (our arithmetic). And after 2029 the phase-down ends because the cap is a flat $10,000: there is nothing left to reduce. The statute therefore gives four tax years, 2026 through 2029, with a cap above $10,000 for anyone below the floor point. Planning that counts on the higher cap for 2030 and later is planning on a law that has not been written (our reading of section 164(b)(7)(A)(iv)).

For K-1 and fund investors the pass-through entity tax can sit outside this cap; that is a separate decision made by the fund, covered in our PTET guide. Property tax levels by state are in our state property tax page. For retirees, the SALT band also sits on top of other MAGI tests: the senior deduction fades between $75,000 and $175,000 single, and Medicare IRMAA reads income from two years earlier.

What a reader can do with this

• Find your MAGI. Take Form 1040 line 11b, add any section 911, 931 or 933 exclusions, and use the table. Under $505,000 the cap is $40,400; between $505,000 and $606,333 it is the table; above, it is $10,000.
• Add up the three SALT items you will have paid by December 31. State income tax withheld and estimated, real estate tax, and personal property tax. Compare with the cap, not with the standard deduction alone.
• Ask your assessor, not a blog, whether the 2027 bill is assessed. The test is local law. The IRS wording quoted above is the 2025 instruction; the 2026 instructions were not available to us on October 28, 2026.
• Run the next year as well. The point of the prepayment is the difference between two years, so you need both. If one of them has a one-time gain, a conversion or a sale, that year’s MAGI may be the one worth shrinking.
• Do not prepay into the floor. If MAGI is above $606,333 the cap is $10,000 and already full for most homeowners.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 28, 2026: Public Law 119-21 (July 4, 2025), sections 70111 and 70120, in the Government Publishing Office text (congress.gov/119/plaws/publ21/PLAW-119publ21.pdf); Instructions for Schedule A (Form 1040) 2025 (IRS); IRS advisory IR-2017-210 (December 27, 2017); Rev. Proc. 2025-32 sections 4.01 and 4.14; Cook County news release on second-installment bills; county tax collector pages for Florida, Texas, California, New Jersey and Massachusetts named in the table. All dollar cases are our arithmetic from the formulas above; the script is in our working papers.