The Higher SALT Deduction Cap: What Massachusetts Homeowners Need to Know in 2026

For 2026, the federal cap on the state and local tax (SALT) deduction is $40,400 ($20,200 if married filing separately), up from $10,000 before 2025. The cap shrinks for modified adjusted gross income above $505,000, but not below $10,000. Whether itemizing now beats your standard deduction depends on your numbers, so run the calculation with your tax advisor.

What does the higher SALT cap mean for Massachusetts homeowners in 2026?

Federal legislation enacted in 2025 raised the SALT cap, which covers state and local income or sales taxes plus property taxes, from $10,000 to $40,000 for 2025 and $40,400 for 2026. For homeowners who used to hit the $10,000 ceiling, that opens up to about $30,400 of additional deductible room in 2026. It matters most where property taxes and incomes are both high, because itemizing may once again beat the standard deduction.

For the bigger picture on what a sale would cost you, see how much you'll net selling your home in Boston, and for the tax side of a sale, the Massachusetts capital gains tax guide.

Key Takeaways

• The SALT cap is $40,400 for 2026 ($20,200 if married filing separately), up from $10,000 before 2025.
• The cap is reduced by 30 percent of MAGI above $505,000 for 2026, but it can't drop below $10,000.
• Under current law the cap rises 1 percent a year through 2029 and returns to $10,000 starting in 2030.
• A Boston home assessed at $750,000 carries about $9,300 a year in property tax at the FY2026 rate, before any residential exemption.
• Itemize only if your mortgage interest, state and local taxes up to the cap, and charitable gifts exceed your standard deduction.

How does the SALT cap change year by year?

It rises slightly each year through 2029, then returns to $10,000 in 2030. Under 26 U.S.C. §164(b)(7):

• 2025: $40,000
• 2026: $40,400
• 2027 through 2029: 101 percent of the prior year's amount (about $40,804 in 2027, $41,212 in 2028, and $41,624 in 2029)
• 2030 and later: back to $10,000

Married individuals filing separately get half of each amount.

How does the SALT cap phase down at higher incomes?

Through 2029, the cap is reduced by 30 percent of the amount by which your modified adjusted gross income (MAGI) exceeds a threshold: $500,000 for 2025 and $505,000 for 2026, rising 1 percent a year after that (half for married filing separately). The cap can't drop below $10,000.

Example for 2026: with MAGI of $555,000, the excess is $50,000, so the cap drops by $15,000, from $40,400 to $25,400. At about $606,333 of MAGI, the cap reaches the $10,000 floor.

Does the higher SALT cap help Boston homeowners?

It can, because property tax plus Massachusetts income tax often exceeds the old $10,000 cap. As an illustration, Boston's FY2026 residential rate is $12.40 per $1,000 of assessed value, so a home assessed at $750,000 carries about $9,300 a year in property tax before any residential exemption. Add Massachusetts income tax, and many owners would have exceeded the old $10,000 cap.

What does Form 1098 show for homeowners?

Your lender's Form 1098 reports the mortgage interest you paid, which is often the largest itemized deduction for homeowners. It also reports points paid on a purchase loan. Under IRS Publication 530, points generally are deducted over the life of the loan, though they can be fully deducted in the year paid on your main home if several tests are met. Check whether your lender also shows property taxes paid from escrow, and ask your preparer whether any mortgage insurance premiums are deductible for 2026.

Why does your settlement statement matter at tax time?

It can support deductions and your cost basis. If you bought or refinanced during the year, your Closing Disclosure (or older HUD-1) shows items paid at closing, such as prepaid interest and property tax adjustments, that may not appear elsewhere. These records also help establish your cost basis, which affects capital gains when you sell.

How do you compare itemizing with the standard deduction?

Add your mortgage interest, your state and local taxes (up to your cap), and your charitable gifts. Compare the total with the standard deduction for your filing status. If it's higher, itemizing lowers your taxable income more. The old assumption that itemizing was pointless under the $10,000 cap may no longer hold.

What documents should you gather before your tax appointment?

Bring these. Form 1040 from last year, W-2s and 1099s; Form 1098 for every mortgaged property; Closing Disclosures for any purchase or refinance during the year; your actual property tax bills; state income tax payment records; and records of charitable gifts.

FAQ

What is the SALT deduction limit for 2026?

$40,400, or $20,200 if married filing separately. It is reduced when modified adjusted gross income exceeds $505,000 ($252,500 if married filing separately), but not below $10,000 ($5,000 if married filing separately).

Who benefits most from the higher cap?

Homeowners whose property taxes and state income taxes together exceed $10,000, whose income is below the phase-down range, and whose total itemized deductions now exceed the standard deduction.

Should I itemize or take the standard deduction in 2026?

Itemize if your deductible expenses (mortgage interest, state and local taxes up to your cap, and charitable gifts) exceed your standard deduction. Run the numbers with your tax advisor.

Is the higher SALT cap permanent?

No. Under current law it rises 1 percent a year through 2029, and the cap returns to $10,000 starting in 2030 unless Congress changes it.

What documents support the deduction?

Form 1098, property tax bills or escrow statements, state income tax payment records, and Closing Disclosures for any purchase or refinance.

The bottom line: the 2026 SALT cap of $40,400 can make itemizing worthwhile again for Massachusetts homeowners, so gather your documents and compare the totals with your tax advisor.

Sources

• IRS, Correction to state and local income tax deduction amount in the 2026 Form 1040-ES: https://www.irs.gov/forms-pubs/correction-to-state-and-local-income-tax-deduction-amount-in-the-2026-form-1040-es
• 26 U.S.C. §164 (Cornell LII): https://www.law.cornell.edu/uscode/text/26/164
• IRS Publication 530, Tax Information for Homeowners: https://www.irs.gov/publications/p530
• City of Boston, How we tax your property: https://www.boston.gov/departments/assessing/how-we-tax-your-property

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About Juan Murray

Juan Murray is a Boston broker associate with more than 30 years of experience helping buyers, sellers, and investors across Greater Boston, personally leading every transaction from the first conversation through closing.

RE/MAX Real Estate Center · (978) 581-0801

Equal Housing Opportunity. Juan Murray is licensed as a Broker in Massachusetts, regulated by the Massachusetts Board of Registration of Real Estate Brokers and Salespersons. This article is general information only and does not constitute legal, tax, or financial advice. Confirm your specific costs and obligations with your closing agent, tax advisor, or lender.