How to Use This Tool
Enter your modified AGI and the state and local tax you paid. The interesting number is the effective marginal rate, not the cap.
How the cap works now
For 2026 the deduction for state and local taxes — income or sales tax, plus property tax — is capped at $40,400. Above $505,000 of modified AGI the cap falls by 30 cents for every dollar of income, until it stops at a floor of $10,000.
The floor is reached at $606,333 of MAGI, after which everyone is back to the old $10,000 limit regardless of income. Between those two figures the cap slides:
- $505,000 → $40,400
- $550,000 → $26,900
- $600,000 → $11,900
- $606,333 and above → $10,000
The phaseout band is the expensive part
Inside the band, an extra dollar of income does two things: it is taxed, and it removes 30 cents of deduction, which is taxed as well.
At a 35% marginal rate, $1,000 of extra income costs:
- $350 of tax on the income itself
- plus 35% of the $300 of deduction lost, which is $105
- $455 in total — an effective 45.5% rate
At 37% it is 48.1%. That is a genuinely high marginal rate on income that is nominally taxed at 35%, and it lasts for a $101,333 stretch of income.
It is a phaseout rather than a cliff, so no single dollar triggers a disaster and there is no threshold to dodge by one dollar. What it does justify is looking at the timing of income: deferring a bonus, delaying an exercise or a sale, or bunching charitable giving into a year outside the band.
It only matters if you itemise
The SALT deduction is an itemised deduction. If your total itemised deductions come to less than the standard deduction — $16,100 single, $32,200 married filing jointly for 2026 — the cap costs you nothing, because you were never going to use it.
That is why the cap bites hardest on a specific group: high earners in high-tax states with substantial property tax, where SALT alone would have exceeded the standard deduction several times over.
Things worth knowing
- It is temporary. The raised cap runs from 2025 through 2029 and reverts to $10,000 afterwards unless Congress acts, which makes multi-year planning genuinely uncertain.
- Married filing separately gets half of everything, so separating is rarely a way around it.
- Pass-through entity taxes exist in many states as a workaround, letting a business pay the state tax and deduct it at the entity level rather than through the individual cap. Whether it helps depends on your state and your structure, and it is exactly the kind of question to take to an accountant.
- Prepaying property tax to bunch it into one year only works if you are under the cap in that year, which the phaseout can quietly prevent.
Figures are for tax year 2026. This is arithmetic, not tax advice.
