Property tax deduction and the SALT cap in 2026: $40,400

What does the cap cover?

The cap is one combined limit. It counts state and local income taxes (or general sales taxes instead), real property taxes and personal property taxes together (26 U.S.C. 164(b)). So your home’s property tax shares the limit with the income tax you pay your state. A homeowner in a state with a high income tax may use up the cap before the property tax is counted. A homeowner in a state with no income tax can have the whole cap available for the property tax and sales tax.

What are the numbers by year?

The statute sets the limit in steps:

Half of each dollar amount applies if you are married and file separately ($20,200 and $252,500 in 2026, with a $5,000 floor). The IRS confirmed the 2026 figures in its correction notice to the 2026 Form 1040-ES.

Be careful with older IRS pages. As of October 2026, IRS Topic 503 still shows $40,000 and Publication 530 still shows the $500,000 threshold. Those are the 2025 figures.

A worked example

A married couple filing jointly has MAGI of $605,000 in 2026 and pays $30,000 of property tax and $20,000 of state income tax, for $50,000 in total.

• MAGI over the threshold: $605,000 - $505,000 = $100,000.
• Reduction: 30% of $100,000 = $30,000.
• Cap: $40,400 - $30,000 = $10,400, which is above the $10,000 floor.

They can deduct $10,400 of the $50,000, and only if all their itemized deductions beat the standard deduction.

Should you itemize?

The cap only matters if you itemize on Schedule A. Everyone else takes the standard deduction, and the taxes you paid do not change the return.

The IRS lists the 2026 standard deduction at $32,200 for married couples filing jointly, $16,100 for single filers and married filing separately, and $24,150 for heads of household. A single filer with $8,000 of property tax and $4,000 of state income tax has $12,000 of taxes under the cap, but needs more than $16,100 of total itemized deductions to gain from itemizing. Add mortgage interest from your mortgage interest deduction to see whether you cross that line.

Which property taxes qualify?

Publication 530 sets the rules for homeowners:

• Taxes based on assessed value are deductible. Itemized charges for services are not, even if you pay them to the tax collector. Examples are a periodic trash collection fee and a charge for water by the gallon. Check your bill for such items.

• Transfer taxes on a home are not deductible. As a buyer, you add them to your basis. As a seller, they reduce what you receive.

• The year you buy or sell. For federal purposes the seller is treated as paying the property tax up to, but not including, the sale date. The buyer is treated as paying it from the sale date, whatever the local lien date. Your settlement statement shows the split.

• Escrow. If your lender pays the tax from escrow, you can deduct only the real estate taxes the lender actually paid from escrow to the taxing authority, not the total you paid into the escrow account. Your tax bill shows that amount.

• Refunds. If you get a refund or rebate of real estate taxes for amounts you paid this year, you reduce your real estate tax deduction by the refund. A refund for a prior year may be income to you in the year you receive it, so keep the notice.

Where states differ

The cap is federal and the same in every state. What differs is your state’s property tax rates and exemptions and whether you pay a state income tax that eats into the cap. See Texas property tax and California property tax for state examples.