The IRS adjusted the SALT deduction limit to $40,400 for 2026. This represents an increase designed to account for inflation. Taxpayers in high-tax states will now be able to deduct slightly more of their state and local taxes before hitting the cap that was introduced in 2017.
Experts suggest maximizing this break before year-end. Their advice includes prepaying property taxes and timing estimated state tax payments. These strategies require you to predict your 2026 income with perfect accuracy, which you cannot do, but feel free to try anyway.
The SALT cap affects itemizers who pay more than $40,400 in combined state income taxes and property taxes. If you are not in this category, this headline means nothing to you. If you are in this category, you already have an accountant who explained this in March.
The mechanics are simple. You add up your state taxes and property taxes. If the total exceeds $40,400, you deduct $40,400. If it does not exceed $40,400, you deduct the actual amount. This is not complicated, yet financial media produces thousands of words about it every year because the alternative is silence.
Prepaying property taxes sounds strategic until you realize you are just moving money from one year to another while the government collects either way. The IRS wins on timing. You win on feeling like you did something.
The real maximization strategy is living in a state without income tax, but that would require you to leave wherever you currently overpay to live, and you will not do that because you have convinced yourself the bagels are better.
Year-end tax planning is financial astrology for people who wear fleece vests.
Photo by Brett Jordan on Unsplash
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