The state and local tax (SALT) deduction limit for 2026 has been raised to $40,400, up slightly from $40,000 in 2025 under President Donald Trump’s “big beautiful bill,” which temporarily boosts this cap through 2029. This change benefits taxpayers who itemize deductions instead of taking the standard deduction, allowing them to deduct property taxes and either state income or sales taxes. The SALT cap will increase by 1% annually until 2029 before reverting back to $10,000 in 2030. Before 2018, there was no limit on the SALT deduction, which was scaled back during Trump’s earlier tax overhaul.

For 2026, taxpayers can either take the standard deduction—which is $16,100 for single filers and $32,200 for married couples—or itemize to maximize tax breaks including SALT, charitable donations, and medical expenses. Roughly 90% of filers used the standard deduction in 2023, but those in high-tax states such as California and New Jersey experienced larger refunds recently, indicating some are benefiting from the increased SALT limit. Experts suggest taxpayers consider strategies like bunching deductions to surpass the standard deduction threshold and gain the SALT benefit.

To optimize SALT deductions, individuals may prepay property taxes or state estimated taxes before the end of the year, provided they receive their tax assessments on time and aren’t restricted by escrow payments. Estimated tax payments for things like self-employment or investment income can also be accelerated to maximize 2026 itemized deductions. Financial advisers recommend careful planning to leverage this temporary increase, especially since timing and payment methods influence the ability to claim larger SALT deductions.

However, higher earners face a phase-out of the SALT benefit starting at a modified adjusted gross income of $505,000, with deductions dropping back to $10,000 after approximately $606,333 in income. This creates what is called the “SALT torpedo,” where taxpayers lose roughly 30% of each additional dollar of benefit within that range, effectively raising their tax rate. For those near this threshold, experts advise close income management to avoid losing the deduction advantage on income-increasing moves like Roth conversions, capital gains, or bonuses.