# The SALT Deduction Cap Is Now $40,400: What It Means for Maryland Taxpayers in 2026

- Link: https://hamtock.com/salt-deduction-cap-2026-maryland/
- Published: 2026-11-02T11:31:55-05:00
- Author: HAMTOCK Consulting

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](https://hamtock.com/what-we-do/tax-planning/) service,
or see our [year-end tax planning checklist](https://hamtock.com/year-end-tax-planning-maryland-small-business/)
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._