Yes, you can deduct property taxes on your home, but only if you itemize on Schedule A, and only within the state and local tax (SALT) cap. The 2025 tax law raised that cap from $10,000 to $40,000 for 2025 and $40,400 for 2026. It shrinks for incomes above $500,000 ($505,000 in 2026) and falls back to $10,000 in 2030. The cap covers property tax plus state income or sales tax combined. With a 2026 standard deduction of $32,200 for married couples, many homeowners will still do better without itemizing. This guide shows the math with typical bills from New Jersey, New York, Illinois, Texas and California.
The short answer
- The SALT cap is $40,400 for 2026. Under 26 U.S.C. §164(b)(7) (opens in a new tab), it was $40,000 for 2025, rises 1% a year through 2029, and returns to $10,000 in 2030. Married filing separately gets half.
- High earners get less. The cap drops by 30% of modified AGI above $505,000 in 2026 ($500,000 in 2025), but never below $10,000.
- You must itemize. Property tax, state income or sales tax, mortgage interest and gifts to charity together have to beat the 2026 standard deduction: $32,200 for married couples filing jointly, $16,100 for single filers, $24,150 for heads of household.
- Prepaying works only for taxes already assessed. You can deduct a payment in December only if the tax has already been assessed and you pay it that year.
- Not everything on the bill counts. Trash and water fees, special assessments for new improvements, HOA dues and transfer taxes are not deductible property taxes.
- Rental property is different. Taxes on a rental go on Schedule E as an expense and do not count toward the SALT cap.
This is general information, not tax advice. Your result depends on your full return, so confirm with a tax professional or the IRS instructions before you file or prepay.
What the SALT cap is and how it changed
The SALT deduction combines three things on Schedule A: state and local income taxes, or general sales taxes instead; real estate taxes; and personal property taxes. Since 2018 the total has been capped. The 2025 law known as the One Big Beautiful Bill Act, which the IRS now calls the Working Families Tax Cuts, raised the cap. The 2025 Schedule A instructions (opens in a new tab) summarize it: the limit “has increased to $40,000 ($20,000 if married filing separately),” is reduced when modified AGI exceeds $500,000 ($250,000 if married filing separately), and “will not be reduced below $10,000 ($5,000 if married filing separately).”
| Tax year | SALT cap | Phase-down starts above MAGI of | Floor |
|---|---|---|---|
| 2018–2024 | $10,000 | No phase-down | — |
| 2025 | $40,000 | $500,000 | $10,000 |
| 2026 | $40,400 | $505,000 | $10,000 |
| 2027–2029 | Prior year × 101% | Prior year × 101% | $10,000 |
| 2030 and later | $10,000 | No phase-down | — |
Married couples filing separately each get half the cap and half the income threshold. For 2026 that is $20,200 each, with the phase-down starting above $252,500 and a floor of $5,000.
How the phase-down works
The Schedule A worksheet subtracts the threshold from your modified AGI, multiplies the excess by 30%, and takes that off the cap. The result cannot fall below $10,000. For 2026:
- MAGI $480,000: under $505,000, so the cap is the full $40,400.
- MAGI $560,000: $55,000 over × 30% = $16,500. The cap is $40,400 − $16,500 = $23,900.
- MAGI about $606,333 or more: the reduction reaches $30,400, so the cap bottoms out at $10,000. For 2025 that point was $600,000.
Modified AGI here is your AGI plus certain excluded foreign and territory income. For most people it is simply AGI.
Itemize or take the standard deduction?
The SALT deduction only helps if your itemized deductions add up to more than the standard deduction. The IRS’s 2026 inflation adjustments (opens in a new tab) set these amounts:
| Filing status | 2025 standard deduction | 2026 standard deduction |
|---|---|---|
| Married filing jointly | $31,500 | $32,200 |
| Head of household | $23,625 | $24,150 |
| Single or married filing separately | $15,750 | $16,100 |
Taxpayers 65 or older, or blind, add $1,650 each in 2026, or $2,050 if unmarried (Rev. Proc. 2025-32 (opens in a new tab)). That raises the bar for itemizing. The new $6,000 deduction for those 65 and older, available for 2025 through 2028, works differently. The IRS (opens in a new tab) says you can claim it whether or not you itemize. It phases out above $75,000 of modified AGI ($150,000 joint).
Worked examples: typical homeowners in five states
The table uses each state’s median real estate taxes paid by homeowners, from the Census Bureau’s 2020–2024 American Community Survey in our dataset. Hypothetically, each household also pays $10,000 of mortgage interest. The last two columns show how much more in state income or sales tax and charity you would need for itemizing to beat the 2026 standard deduction.
| State | Median property tax paid | + $10,000 interest | Still needed, married ($32,200) | Still needed, single ($16,100) |
|---|---|---|---|---|
| New Jersey | $9,590 | $19,590 | $12,610 | None (already $3,490 over) |
| New York | $6,582 | $16,582 | $15,618 | None (already $482 over) |
| Illinois | $5,298 | $15,298 | $16,902 | $802 |
| California | $5,124 | $15,124 | $17,076 | $976 |
| Texas | $4,232 | $14,232 | $17,968 | $1,868 |
What the table shows:
- Single homeowners in New Jersey and New York with a typical bill and a mortgage usually come out ahead by itemizing. In Illinois, California and Texas, almost any state income or sales tax closes the gap.
- Married couples need $12,600 to $18,000 more. In high-tax states, state income tax often covers much of that. In Texas, which has no income tax, a couple can deduct general sales tax instead, but that is rarely enough. Most Texas couples with a median bill will take the standard deduction.
- Couples without a mortgage rarely itemize unless their property tax plus state income tax tops $32,200.
Example: where the higher cap changes the answer
Hypothetical New Jersey couple, 2026, MAGI $280,000: property tax $15,000, which is not unusual in the eight New Jersey counties where the Census median is top-coded at $10,000+; state income tax $9,000; mortgage interest $12,000; charity $2,500.
| Item | Old $10,000 cap | 2026 $40,400 cap |
|---|---|---|
| SALT ($15,000 + $9,000 = $24,000 paid) | $10,000 | $24,000 |
| Mortgage interest | $12,000 | $12,000 |
| Charity | $2,500 | $2,500 |
| Itemized total | $24,500 (standard deduction wins) | $38,500 |
| Advantage over $32,200 standard | $0 | $6,300 of extra deductions |
At a 24% marginal rate, $6,300 of extra deductions saves about $1,500 of federal tax. If the same couple had MAGI of $620,000, the cap would be back at $10,000 and they would likely take the standard deduction again. For context on how heavy these bills are relative to income, see our property tax burden by state ranking.
Prepaying property tax in December
The rule is in the Schedule A instructions: “Only taxes paid in 2025 and assessed prior to 2026 can be deducted for 2025. State or local law determines whether and when a property tax is assessed.” It dates from the IRS’s December 2017 advisory, IR-2017-210 (opens in a new tab). Its two examples still decide most cases:
- Allowed: a county assessed the tax and billed it in two installments, the second due the following January. Paying that second installment by December 31 was deductible in the earlier year.
- Not allowed: a county that had not yet assessed the next year’s tax accepted early payments anyway. Those were “not allowed to deduct the prepayment” because the tax had not been assessed.
Bills that commonly fit the allowed pattern:
| State | Bill timing | December option |
|---|---|---|
| California | Annual secured bills are mailed by November 1. The first half is due November 1 (delinquent after December 10), the second February 1 (delinquent after April 10) (BOE Publication 29 (opens in a new tab)). | Pay the second installment of the bill you already have by December 31 to count it this year. |
| Texas | Taxing units start mailing bills in October. Payment is due by January 31, and taxes are delinquent February 1 (Texas Comptroller (opens in a new tab)). | Paying in December puts the whole bill in this tax year; paying in January puts it in next year. |
Prepaying only helps if you itemize this year and you are still under your SALT cap. Some households alternate, itemizing in one year and taking the standard deduction the next, by timing when they pay bills like these. If your taxes are paid from escrow, ask your servicer before paying anything directly, so the bill is not paid twice. For bills that have not yet been assessed, such as next year’s estimated installments in many places, a December payment is generally just early cash, not a deduction.
Escrow accounts, closing statements and Form 1098
- Escrow: you can deduct only what the servicer actually paid to the taxing authority during the year, not what you deposited into escrow (Schedule A instructions). Your annual escrow statement shows the disbursements.
- Form 1098, box 10: the Form 1098 instructions (opens in a new tab) let lenders report “real estate taxes … paid from escrow” in box 10, labeled “Other.” Reporting it is optional, so the box may be blank or may not match. Use the escrow statement or the collector’s payment history.
- Buying or selling: IRS Publication 530 (opens in a new tab) treats the seller as paying taxes up to the day before the sale and the buyer from the date of sale. Your share is on the settlement statement, even if the seller wrote the check.
If your escrow payment jumps after a reassessment, see our escrow shortage guide.
What is not deductible as property tax
Only taxes “assessed uniformly at a like rate on all real property throughout the community” and used for general public purposes go on Schedule A line 5b. Read your bill line by line. Our guide on how to read a property tax bill shows where these items appear.
| Item | Deductible? | IRS treatment |
|---|---|---|
| General ad valorem tax (county, city, school, special district rates) | Yes | Schedule A line 5b, within the SALT cap |
| Flat or per-unit service charges (trash, water, lawn mowing) | No | A charge for services, not a tax |
| Special assessments for new sidewalks, streets, sewers | No | Added to your home’s basis |
| Assessments for maintenance, repair or interest on an existing facility | Yes, if you can show that portion | Deductible only to the extent documented |
| HOA or condo association dues and assessments | No | Imposed by the association, not a government |
| Transfer or stamp taxes on buying or selling a home | No | Buyer adds to basis; seller subtracts from amount realized |
| Foreign real property taxes | No (personal use) | Excluded from Schedule A |
Special assessments are the most common trap. See our guide to special assessments on a property tax bill for how they are listed.
Rental property and second homes
Rentals: the cap in §164(b)(6) does not apply to taxes “paid or accrued in carrying on a trade or business or an activity described in section 212.” Property tax on a rental is deducted on Schedule E as a rental expense, without limit, and does not use up your SALT cap. If you rent out part of your home, split the tax between the rented share (Schedule E) and the personal share (Schedule A).
Second homes: Schedule A line 5b covers taxes on any real estate you own that is not used for business, so a vacation home’s taxes count. They share the same single SALT cap as your main home and your state income tax. Two large bills can hit the cap quickly.
State relief programs are separate from the federal deduction. If you are a New Jersey senior, our guide to ANCHOR, Stay NJ and Senior Freeze covers the PAS-1 due November 2, 2026. Ask your tax preparer how any relief you receive affects your return.
What to do before December 31
- Add up your 2026 SALT: property tax actually paid (or disbursed from escrow), plus state income tax withheld and estimated payments, or sales tax.
- Check your cap: $40,400, reduced if your 2026 modified AGI will exceed $505,000; half if married filing separately.
- Add mortgage interest and charity, and compare the total with your standard deduction, including the extra amount for age 65 or blindness.
- Look at your bill’s installments. If a bill is already assessed and due early next year, paying by December 31 may move the deduction into 2026. Find your collector through our county search.
- Strip out non-tax charges such as fees and improvement assessments before you enter line 5b.
- Confirm with a tax professional before prepaying large amounts, especially if you are near the phase-down range.
Frequently asked questions
Can I deduct property taxes if I take the standard deduction?
No. Property taxes on your home are deductible only on Schedule A as an itemized deduction. Taxes on rental property are the exception; they go on Schedule E either way.
What is the SALT deduction limit for 2026?
$40,400, or $20,200 if married filing separately. It is reduced by 30% of modified AGI above $505,000 ($252,500 if married filing separately), but not below $10,000 ($5,000).
Does the $40,000 SALT cap include state income tax?
Yes. One cap covers state and local income tax (or sales tax instead), real estate tax and personal property tax combined.
Can I prepay 2027 property taxes in 2026 and deduct them?
Only if the tax has been assessed by the end of 2026 and you pay it in 2026. Paying the remaining installment of a bill you already received usually qualifies. Paying an amount the county has not yet assessed does not.
Where do I find how much property tax my lender paid?
Check your year-end escrow statement. Form 1098 box 10 may show it, but lenders are not required to fill that box.
When does the SALT cap go back to $10,000?
For tax years beginning in 2030, under current law.
Sources reviewed October 26, 2026. Federal tax rules can change and apply differently to each return; this guide is not tax advice. Confirm your situation with a tax professional or the current IRS instructions.