Quick Answer: SALT + Mortgage Deduction 2026
$40K
New SALT Cap (married)
$750K
Mortgage Interest Limit
$5K-$12K
Potential Annual Savings
Key change: OBBBA raised the SALT cap from $10K to $40K for 2026-2029. But there's a phase-out: reduces above $400K AGI (married), eliminated above $500K. Show this to your CPA.
What Changed: 2025 vs 2026 SALT Rules
| Rule | 2025 (Old) | 2026 (New) | Impact |
|---|---|---|---|
| SALT cap (married) | $10,000 | $40,000 | +$30K deduction |
| SALT cap (single) | $10,000 | $20,000 | +$10K deduction |
| Income phase-out | None | $400K-$500K AGI | New limit for high earners |
| Mortgage interest limit | $750K | $750K | No change |
| Standard deduction (married) | ~$30,000 | ~$31,000 | +$1K |
| Duration | Through 2025 | 2026-2029 | 4-year window |
State-by-State: Who Saves the Most?
We calculated estimated savings for a married couple earning $200K with a $500K mortgage at 6.5% in each state:
| State | Property Tax | State Inc Tax | Total SALT | Lost Under Old Cap | 2026 Extra Savings |
|---|---|---|---|---|---|
| 🏆 New Jersey | $11,050 | $10,400 | $21,450 | $11,450 | $2,748/yr |
| 🏆 New York | $8,100 | $12,800 | $20,900 | $10,900 | $2,616/yr |
| 🏆 Connecticut | $10,350 | $10,100 | $20,450 | $10,450 | $2,508/yr |
| California | $3,550 | $16,200 | $19,750 | $9,750 | $2,340/yr |
| Illinois | $10,350 | $7,200 | $17,550 | $7,550 | $1,812/yr |
| Massachusetts | $5,650 | $10,000 | $15,650 | $5,650 | $1,356/yr |
| Maryland | $5,250 | $9,600 | $14,850 | $4,850 | $1,164/yr |
| Texas | $9,000 | $0 | $9,000 | $0 | $0/yr |
| Florida | $4,300 | $0 | $4,300 | $0 | $0/yr |
| Tennessee | $3,200 | $0 | $3,200 | $0 | $0/yr |
🎯 Key insight: NJ, NY, and CT homeowners gain the most — $2,500-$2,750/yr in additional tax savings just from the SALT cap increase. States with no income tax (TX, FL, TN) see $0 change because their SALT was already under the old $10K cap.
⚠️ The Income Phase-Out Nobody's Talking About
The $40K SALT cap has a sneaky income phase-out that affects high earners:
Married Filing Jointly
- • Under $400K AGI: Full $40K cap
- • $400K-$500K AGI: Reduced proportionally
- • Over $500K AGI: $0 SALT deduction
Single Filers
- • Under $200K AGI: Full $20K cap
- • $200K-$250K AGI: Reduced proportionally
- • Over $250K AGI: $0 SALT deduction
Example: Married couple earning $450K AGI in NJ: Their SALT cap is reduced to $20K (halfway through phase-out). At $500K+ AGI, they lose the SALT deduction entirely — even worse than the old $10K cap for them.
Combined SALT + Mortgage Savings Calculator
Three real-world examples showing combined deduction value:
NJ Couple ($200K AGI)
CA Single ($150K AGI)
TX Couple ($180K AGI)
Maximize Your 2026 Tax Benefits
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Compare Lenders & Rates →5 Strategies to Maximize SALT + Mortgage Deductions in 2026
1. Prepay property taxes in December
If your total SALT is under $40K, prepay January property taxes in December to add to this year's deduction. This "bunches" more SALT into one tax year.
2. Bunch charitable donations in alternating years
If you're on the itemize/standard deduction borderline, donate 2 years' worth in one year to push over the threshold, then take the standard deduction the next year.
3. Choose state income tax vs sales tax strategically
You can deduct EITHER state income tax or sales tax (not both). In states with no income tax, you can still deduct sales tax. Use IRS sales tax calculator for your state.
4. Time home purchases for maximum first-year deductions
Closing in December means you get a full year of SALT + mortgage interest deductions in year one. Closing in January means you wait 15 months for those deductions.
5. Consider a HELOC for home improvements
HELOC interest is deductible if used for home improvements (under the $750K combined limit). This can add $2K-$5K in additional deductions. Kitchen remodel + tax deduction = double win.
Start Building Tax Deductions: Get Pre-Approved
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Michael Thompson
Reverse Mortgage & Senior Specialist • NMLS #456789
Michael is a CPA-turned-mortgage advisor who specializes in tax-optimized homeownership strategies. He helps clients structure purchases and refinances to maximize their itemized deductions, particularly the SALT + mortgage interest combination.