The SALT Deduction Just Got Bigger: What Massachusetts Taxpayers Need to Know

Posted On: Wednesday, July 1, 2026

The SALT Deduction Just Got Bigger: What Massachusetts Taxpayers Need to Know

If you own a home in Massachusetts, pay state income taxes, or have wondered whether itemizing deductions is worth it, there’s good news. A major change to the federal tax code has significantly increased the State and Local Tax (SALT) deduction.

For many taxpayers, especially homeowners in high-tax states like Massachusetts, this change could result in meaningful tax savings over the next several years.

Here’s what you need to know.

What Is the SALT Deduction?

The State and Local Tax (SALT) deduction allows taxpayers who itemize deductions on their federal tax return to deduct certain state and local taxes they paid during the year. These include:

  • State and local income taxes (or state sales taxes, if elected)
  • Real estate (property) taxes
  • Personal property taxes

The deduction helps reduce your taxable income, potentially lowering your overall federal tax bill.

What Changed?

The tax legislation signed into law dramatically increased the SALT deduction cap beginning with the 2025 tax year.

The new limits for 2026 are:

  • $40,400 for single filers and married couples filing jointly
  • $20,200 for married taxpayers filing separately

These amounts will increase by approximately 1% annually through tax year 2029.

After 2029, unless Congress extends the provision, the deduction cap is scheduled to return to its previous limit of $10,000 ($5,000 for married filing separately).

Why This Matters for Massachusetts Taxpayers

Massachusetts residents often pay substantial state income taxes and property taxes, making the previous $10,000 SALT cap a frustrating limitation for many homeowners.

With the expanded deduction, taxpayers may now be able to deduct a much larger portion of these taxes on their federal return.

This is particularly beneficial for:

  • Homeowners with higher property tax bills
  • Individuals with significant Massachusetts income taxes
  • Married couples filing jointly
  • Taxpayers who already itemize deductions

For many families, the increased deduction could reduce federal taxable income by tens of thousands of dollars compared to prior years.

Not Everyone Qualifies for the Full Deduction

While the higher deduction is welcome news, it does phase out for higher-income taxpayers.

For tax year 2026:

  • The phase-out begins when Modified Adjusted Gross Income (MAGI) exceeds $505,000 for single and married filing jointly taxpayers.
  • For married taxpayers filing separately, the phase-out begins at $252,500.

Once your income exceeds these thresholds, the deduction limit is reduced by 30 cents for every dollar your MAGI exceeds the threshold.

However, the deduction can never be reduced below the statutory minimum of:

  • $10,000 for single and joint filers
  • $5,000 for married filing separately

More Taxpayers May Benefit from Itemizing

One of the biggest impacts of the expanded SALT deduction is that more taxpayers may find it worthwhile to itemize their deductions rather than take the standard deduction.

Under previous law, many taxpayers didn’t have enough itemized deductions to exceed the standard deduction after the SALT cap was limited to $10,000.

Now, with a significantly higher SALT deduction available, combining:

  • State income taxes
  • Property taxes
  • Mortgage interest
  • Charitable contributions
  • Other eligible itemized deductions

This may produce greater tax savings than claiming the standard deduction.

This is especially true for Massachusetts homeowners.

One More Important Change

Beginning in 2026, taxpayers in the highest federal tax bracket (37%) should also be aware of another limitation.

The value of itemized deductions for taxpayers in the top bracket is capped at 35%, meaning each deductible dollar generally reduces taxes by approximately 35 cents.

While this limitation affects some higher-income taxpayers, many will still benefit substantially from the increased SALT deduction.

Planning Ahead Is More Important Than Ever

The expanded SALT deduction is scheduled to remain in effect through 2029, with modest annual increases for inflation. Unless Congress acts again, the deduction limit will revert to $10,000 beginning in 2030.

Because these rules interact with income levels, filing status, and other deductions, every taxpayer’s situation is different.

If you live in Massachusetts, own a home, or have significant state and local taxes, now is a great time to review your tax strategy and determine whether itemizing deductions could lower your federal tax bill.

Work with a Local CPA Who Understands Massachusetts Taxes

Tax law continues to evolve, and even seemingly straightforward changes can create new planning opportunities.

At Rakatansky CPA, we help individuals, families, and business owners throughout Sudbury and the surrounding communities understand how changing tax laws affect their financial picture. Whether you’re evaluating whether to itemize, planning ahead for future tax years, or simply want to ensure you’re maximizing every available deduction, we’re here to help.

Contact Rakatansky CPA today to schedule a consultation and learn how the new SALT deduction rules may impact your 2026 tax return.