Quick Answer
Yes, the $10,000 SALT deduction cap was eliminated starting in 2026. You can now deduct unlimited state and local taxes (property, income, and sales taxes) if you itemize, potentially saving high earners in high-tax states thousands in federal taxes.
Best Answer
Sarah Chen, CPA
Best for typical employees who may benefit from the unlimited SALT deduction
How the SALT deduction cap changed for 2026
The $10,000 limit on state and local tax (SALT) deductions that was in effect from 2018-2025 has been eliminated for 2026. You can now deduct your full amount of state and local taxes — including property taxes, state income taxes, and state sales taxes — without any cap, as long as you itemize deductions.
This change is part of the One Big Beautiful Bill Act, which restored many pre-2018 tax provisions. According to IRS Publication 17, SALT deductions are now unlimited for taxpayers who choose to itemize rather than take the standard deduction.
Example: $85,000 earner in New Jersey
Let's say you earn $85,000 in New Jersey and own a home:
Under the old cap (2018-2025):
Under 2026 rules:
When this helps most
Impact on your paycheck withholding
If you expect to benefit from unlimited SALT deductions, you may want to adjust your W-4 to withhold less federal tax throughout 2026. The increased deduction will reduce your federal tax liability, so you might be over-withholding if you don't adjust.
What you should do
1. Calculate your total SALT payments from 2025 to estimate 2026 impact
2. Compare itemizing vs. standard deduction — use our calculator to see which saves more
3. Adjust your W-4 if you'll owe significantly less federal tax due to higher SALT deductions
4. Consider bunching strategies — you might benefit from paying property taxes early or late to optimize deductions
[Use our W-4 optimizer](w4-optimizer) to calculate the right withholding based on your expected SALT deductions.
Key takeaway: Removing the $10,000 SALT cap can save taxpayers in high-tax states $1,000-$5,000+ annually, but only if their total itemized deductions exceed the standard deduction.
*Sources: [IRS Publication 17](https://www.irs.gov/pub/irs-pdf/p17.pdf), One Big Beautiful Bill Act of 2025*
Key Takeaway: The SALT cap elimination saves high-tax state residents $1,000-$5,000+ annually, but only benefits those who itemize deductions above the $30,000 standard deduction.
Federal tax savings from unlimited SALT deduction by income level and location
| Income Level | Example SALT Amount | Old Cap Deduction | New Unlimited Deduction | Annual Federal Tax Savings* |
|---|---|---|---|---|
| $75,000 (22% bracket) | $15,000 | $10,000 | $15,000 | ~$1,100 |
| $100,000 (24% bracket) | $18,000 | $10,000 | $18,000 | ~$1,920 |
| $150,000 (32% bracket) | $22,000 | $10,000 | $22,000 | ~$3,840 |
| $250,000 (35% bracket) | $28,000 | $10,000 | $28,000 | ~$6,300 |
More Perspectives
Marcus Rivera, CFP
Best for pre-retirees and recent retirees managing property taxes and state tax planning
How SALT changes affect retirement planning
For those approaching or in retirement, the elimination of the SALT cap creates significant tax planning opportunities, especially if you own a home in a high-tax state.
Retirement-specific considerations
Property taxes in retirement: Many retirees have paid off their mortgages but still face substantial property tax bills. In states like New Jersey or New York, annual property taxes of $15,000-$25,000+ aren't uncommon. Previously, you could only deduct $10,000 of this. Now, the full amount is deductible.
State pension taxation: If you receive a state pension or have significant retirement account withdrawals subject to state income tax, the unlimited SALT deduction becomes even more valuable as both property taxes AND state income taxes count toward your deduction.
Example: Retired couple in Long Island
Strategic timing considerations:
Key takeaway: Retirees in high-tax states can save $2,000-$4,000+ annually from unlimited SALT deductions, making relocation to tax-friendly states less financially compelling.
Key Takeaway: Retirees in high-tax states can save $2,000-$4,000+ annually from unlimited SALT deductions, making relocation to tax-friendly states less financially compelling.
Sarah Chen, CPA
Best for high-income earners who pay substantial state and local taxes
Maximum impact for high earners
High earners see the biggest benefit from eliminating the SALT cap because they typically pay the most in state income and property taxes, and they're in higher federal tax brackets where deductions are worth more.
Example: $200,000 earner in California
Compare this to the same earner under the old cap:
Strategic planning for high earners
Bunching strategy: Consider paying two years of property taxes in one year to maximize deductions in high-income years, then taking the standard deduction in lower-income years.
State planning: The unlimited SALT deduction makes high-tax states more attractive for high earners. A $300,000 earner in New York might save $6,000-$8,000 annually compared to the capped years.
AMT considerations: High earners should verify they're not subject to Alternative Minimum Tax (AMT), which disallows SALT deductions entirely. The SALT cap elimination doesn't help if you're in AMT.
Key takeaway: High earners in high-tax states can save $4,000-$8,000+ annually from unlimited SALT deductions, potentially making relocation less financially necessary.
Key Takeaway: High earners in high-tax states can save $4,000-$8,000+ annually from unlimited SALT deductions, potentially making relocation less financially necessary.
Sources
- IRS Publication 17 — Your Federal Income Tax (For Individuals)
- IRS Schedule A Instructions — Itemized Deductions
Related Questions
Reviewed by Sarah Chen, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.