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It’s been more than a year since Republicans enacted President Donald Trump‘s “big beautiful bill,” and many filers can still benefit from a temporary change to the federal deduction limit for state and local taxes, known as SALT.
Trump’s legislation raised the SALT deduction limit to $40,000 in 2025, up from $10,000 in 2024. That cap increased to $40,400 for 2026, and will rise yearly by 1% through 2029 before reverting to $10,000 in 2030.
The tax break, which applies to itemizers, includes property taxes plus either state and local income or sales taxes, but not both. Before Trump’s 2017 tax overhaul, the SALT deduction was unlimited, and the 2018 change was a pain point for certain residents of high-tax states.
When filing taxes, you claim the larger of the standard deduction — $16,100 for single filers and $32,200 for married couples for 2026 — or total itemized tax breaks. Your itemized deductions could include SALT, tax breaks for charitable gifts, and medical expenses, among others.
For tax year 2023, roughly 90% of filers used the standard deduction, according to the latest IRS data.
The IRS hasn’t released details on SALT deduction claims for 2025. But some data showed filers in high-tax states such as California and New Jersey received bigger refunds during the 2026 filing season.
This could suggest that these filers benefited from the bigger SALT deduction, according to Heather Long, chief economist at Navy Federal Credit Union.
Typically, the SALT deduction benefits “upper-middle to upper-income earners,” due to the phase-outs, Garrett Watson, vice president of federal tax policy with the Tax Foundation, told CNBC.
For those affected, here are some strategies to consider for 2026.
Optimize your tax payments for 2026
Since the SALT deduction benefits only itemizers, you may consider bunching itemized deductions into a single year to exceed the standard deduction threshold.
For example, if you paid property taxes earlier in 2026, you could make a second payment by Dec. 31 for next year’s balance, according to certified financial planner Juan Hernandez-Ariano, founder of advisory firm WealthCreate in Houston.
“For a family that usually ends up just short of itemizing, that can be enough” to clear the standard deduction threshold, he said. However, if your mortgage lender manages your yearly property tax payments via an escrow account, you could have less flexibility.
You must receive a property tax assessment before you can prepay the bill, and the assessment timing varies by jurisdiction.
Similarly, if you owe state quarterly estimated taxes for self-employment, small business income or investment earnings, you could make the final 2026 payments by Dec. 31, experts say. The federal fourth-quarter estimated tax deadline is Jan. 15, 2027, but state due dates may vary.
Watch the ‘SALT torpedo’ for higher earners
Trump’s bigger SALT deduction also created a so-called “SALT torpedo,” or artificially high tax rate, for taxpayers around the income limit thresholds.
“The higher cap creates more opportunity, but higher-income taxpayers can lose the benefit as income rises,” said CFP Joon Um, managing owner of financial firm Secure Tax and Accounting in Hayward, California.
For 2026, the full $40,400 SALT deduction starts to phase out, or get smaller, once modified adjusted gross income exceeds $505,000, and the tax break drops to $10,000 for earnings of about $606,333 and above.
The phase-out creates the artificially high tax rate because you lose 30% of every dollar of benefit between $505,000 and $606,333 for 2026. That makes precise income projections important, especially for those near the phase-out range, experts say.
For clients near the phase-out, Um said he’s “looking closely” at moves that incur income, such as Roth conversions, which boost current-year earnings, plus any capital gains or bonuses.
