Can you deduct property tax? The SALT deduction in 2026

Property tax on your home can be deducted on your federal income tax return, but only if you itemize, and only up to a limit. That limit changed sharply in 2025, so many homeowners who stopped itemizing a few years ago should check again. Here is how it works for the 2026 tax year, which you file in early 2027.

What the SALT deduction covers

SALT stands for state and local taxes. If you itemize, you can deduct the total of:

• property tax on real estate you own, including your home and land
• either state and local income tax or state and local sales tax, but not both
• personal property tax based on value, such as some car registration taxes

All of these share one cap. A homeowner in a high-tax state can hit it with income tax and property tax combined.

The cap: $10,000, then $40,000

From 2018 through 2024, the SALT deduction was capped at $10,000 a year ($5,000 if married filing separately). For many homeowners in New Jersey, New York, Illinois, California and Connecticut, property tax alone used up most of that.

A 2025 federal law raised the cap to $40,000 for 2025, with a 1% increase each year through 2029. For 2026 the cap is $40,400, or half that for married people filing separately. In 2030 it is scheduled to drop back to $10,000 unless Congress acts again.

The income phase-down

Higher earners get less of the larger cap. For 2026, if your modified adjusted gross income is above about $505,000, the cap is reduced by 30% of the amount over that threshold. It never goes below $10,000. At incomes of roughly $600,000 and up, most filers are back to the old $10,000 limit.

Itemize or take the standard deduction?

The SALT deduction only helps if your itemized deductions add up to more than the standard deduction. For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.

Itemized deductions for a typical homeowner are mainly:

• state and local taxes, up to the cap
• mortgage interest on up to $750,000 of loan balance
• charitable gifts

A married couple with $9,000 in property tax, $12,000 in state income tax and $14,000 in mortgage interest would have $35,000 in itemized deductions, $2,800 more than the standard deduction. Under the old $10,000 cap they would have had only $24,000 and taken the standard deduction instead.

The typical homeowner bill in the US is $3,119 a year, so many people in lower-tax states will still do better with the standard deduction. The new cap matters most where bills are high. In New Jersey the typical bill is $9,590, and in New York, Connecticut and New Hampshire it is above $6,500. See how your state compares in our state ranking.

What counts as deductible property tax

• Taxes based on value. Charges based on your home’s value count. Flat fees on your tax bill, such as trash, water or sidewalk charges, generally do not. Our guide to reading your bill shows where those fees appear.
• Taxes you actually paid in the year. If your lender pays from escrow, deduct what the lender paid to the county during the year, not what you put into escrow. Your year-end mortgage statement (Form 1098) usually shows it.
• Taxes in the year of a sale. In the year you buy or sell, the tax is split between buyer and seller by date. Your closing statement shows each side’s share.
• Prepaying. Paying next year’s bill early only counts if the county has already assessed it. Paying ahead of the assessment does not create a deduction.

Rental and business property

Property tax on a rental home or business property is not part of the SALT deduction. It is a business expense, deducted on Schedule E for rentals or Schedule C for a business, and the cap does not apply. Our guide to property tax on rental property explains more.

A note on state returns

Some states let you deduct property tax or claim a property tax credit on your state income tax return, separate from the federal rules. Others offer income-based rebates instead. Check your state page under ways to lower your bill, and our guides to homestead exemptions and senior relief.

This guide explains the general rules. Your own return may have other factors, so check the current IRS instructions for Schedule A or talk to a tax preparer before you file.