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More than a year after Republicans signed into law President Donald Trump’s “Big and Beautiful Bill,” many filers can still benefit from temporary changes to the federal deduction limit for state and local taxes (SALT).
President Trump’s bill would increase the cap on the SALT deduction from $10,000 in 2024 to $40,000 in 2025. That cap will rise to $40,400 in 2026, increase by 1% each year until 2029, and return to $10,000 in 2030.
Tax credits applied to your statement include either property taxes and state and local income or sales taxes, but not both. Before President Trump’s 2017 tax reform, the SALT deduction was unlimited, but the 2018 change hurt some residents of high-tax states.
When you file your taxes, you claim either the greater of the standard deduction ($16,100 for single filers in 2026, $32,200 for married couples) or the total itemized tax deduction. Itemized deductions include salt, tax breaks for charitable donations, medical expenses, and more.
According to the latest IRS data, about 90% of filers took the standard deduction for the 2023 tax year.
The IRS has not released details for applying for the 2025 SALT deduction. But some data shows that filers in high-tax states like California and New Jersey received larger refunds during the 2026 filing season.
Heather Long, chief economist at Navy Federal Credit Union, said this could suggest that these filers are benefiting from a larger SALT deduction.
Garrett Watson, vice president of federal tax policy at the Tax Foundation, told CNBC that due to the phaseout, the SALT deduction typically benefits “upper middle to high income earners.”
For those affected, here are some strategies to consider heading into 2026.
Optimize your 2026 taxes
Since the SALT deduction only benefits itemized deductions, you may also consider consolidating your itemized deductions into one year to exceed the standard deduction threshold.
For example, if you paid your property taxes at the beginning of 2026, you have until Dec. 31 to make a second payment on next year’s balance, said Juan Hernandez Ariano, a certified financial planner and founder of the Houston advisory firm Wealth Create.
“For families that typically fall a little short on itemizing, that may be enough to meet the standard deduction threshold,” he said. However, if your mortgage lender manages your annual property tax payments through an escrow account, you may have less flexibility.
You must have your property tax assessed before you can prepay your bill. The timing of the assessment varies by jurisdiction.
Similarly, if you owe state-estimated taxes quarterly on self-employment, small business income or investment income, experts say the final payment for 2026 could be made by Dec. 31. The federal fourth quarter estimated tax deadline is January 15, 2027, but state deadlines may vary.
See “SALT Torpedo” for high-income earners
President Trump’s expansion of the SALT deduction created so-called “SALT torpedoes,” or artificially high tax rates, for taxpayers near the income threshold.
“Raising the cap will increase opportunities, but higher-income taxpayers may lose out on the benefits as their incomes rise,” said CFP Jun Eum, managing owner of Secure Tax and Accounting, a financial firm in Hayward, California.
In 2026, the full $40,400 SALT deduction will phase out or begin to shrink once your modified adjusted gross income exceeds $505,000, reducing the tax reduction to $10,000 for incomes above approximately $606,333.
The phaseout would create an artificially high tax rate by forfeiting 30% of every dollar of benefits between $505,000 and $606,333 in 2026. That’s why accurate income projections will be important, especially for people closer to the phase-out range, experts say.
For clients nearing a phase-out, Um said they are “watching closely” any income-related moves, such as Roth conversions that would boost this year’s profits, plus capital gains and bonuses.
