For years, Maryland homeowners and business owners ran into the same wall at tax time: no matter how much they paid in state income tax, county income tax and property tax, the federal deduction for state and local taxes (SALT) stopped at $10,000. That wall moved. The federal tax law signed in July 2025 raised the cap to $40,000 for 2025, and it increases by 1% a year after that, to $40,400 for 2026.
Because Maryland has both a state and a county income tax, plus property taxes that are among the higher ones in the region, few states feel this change more. Here is what it means for your 2026 return and what to look at before the year ends.
How the new SALT cap works
The SALT deduction lets you deduct state and local income taxes (or sales taxes, if you choose them instead) plus real estate and certain personal property taxes, but only if you itemize deductions on Schedule A. The key points for 2026:
- The cap is $40,400 for most filers, including married couples filing jointly. Married people filing separately get half.
- Higher earners get less. The cap is reduced by 30% of modified adjusted gross income above roughly $505,000 for 2026 (about half that for married filing separately), but it never drops below $10,000. For a household with income well above that level, the old $10,000 limit effectively still applies.
- It is temporary. Under current law, the higher cap keeps rising 1% a year through 2029 and then returns to $10,000 in 2030.
Why this matters more in Maryland
Maryland residents pay state income tax plus a local income tax that goes to their county, and in Montgomery County that local rate is at the top of the allowed range. Add property taxes on a home in Silver Spring, Bethesda or Rockville, and it is common for a family to pay well over $10,000 a year in state and local taxes. Under the old rules, everything above $10,000 was simply lost for federal purposes. Under the new rules, much of it can count.
Itemize or take the standard deduction?
A bigger SALT deduction only helps if your total itemized deductions are larger than your standard deduction. For 2026, the standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. Itemized deductions include:
- State and local taxes, up to the cap
- Mortgage interest on a qualifying home loan
- Charitable contributions
- Medical expenses above 7.5% of adjusted gross income
Many Maryland homeowners who took the standard deduction for years may now come out ahead by itemizing. For example, a couple paying $18,000 in state and local income and property taxes and $14,000 in mortgage interest would have $32,000 in itemized deductions before counting any charitable gifts. That is right at the standard deduction, so even modest giving could tip the balance. Run the numbers rather than assuming last year’s choice still fits.
One more point for Maryland filers: your choice on the federal return generally carries over to your Maryland return, and Maryland has its own rules for itemized deductions. A decision that helps on one return can cost a little on the other, so look at both together.
What business owners should know
The SALT cap applies to individuals, not to taxes a business pays as an ordinary business expense. That is why many owners of partnerships and S corporations use Maryland’s pass-through entity (PTE) tax election, which lets the business pay state tax on the owners’ behalf and deduct it at the business level, outside the personal cap. The 2025 law left that approach in place.
With the higher personal cap, the math has changed. For some owners whose total state and local taxes now fit under $40,400, the PTE election may matter less than before. For high earners whose cap is reduced back toward $10,000, it may matter more. If your business made the election in prior years, 2026 is a good year to confirm it still makes sense.
Moves to consider before December 31
- Project your 2026 itemized deductions. Add up state and local taxes paid this year, mortgage interest and planned giving, and compare the total with your standard deduction.
- Look at the timing of your fourth-quarter estimate. If you make Maryland estimated payments, the fourth installment is normally due in January. Paying it by December 31 can move that deduction into 2026, which may help if you are itemizing and still under the cap.
- Bunch charitable gifts. If you are close to the line, giving two years of planned donations in one year can push you over the standard deduction for that year.
- Watch your income if you are near $505,000. Because the cap shrinks as income rises above that level, a year-end bonus, a large capital gain or a business sale can reduce your deduction. Timing may make a real difference.
- Review your PTE election with your tax advisor if you own a pass-through business.
Get a clear answer for your situation
The new SALT rules can mean real savings for Maryland households, but only if your return is set up to use them. HAMTOCK Consulting helps individuals and business owners in Silver Spring and across Montgomery County project their 2026 tax, decide whether to itemize, and review pass-through entity elections before year-end. Learn more about our tax planning service, or see our year-end tax planning checklist for other moves to make before December 31.
Book a consultation today: call us at 240-432-2749 or email contact@hamtock.com. We reply to consultation requests within one business day.
This article is general information, not tax advice for your specific situation. Rules are current as of November 2026; talk with us before acting.
