The SALT Cap for Boston Owners: $40,000 for 2025, $40,400 for 2026

The overall limit on deducting state and local income, sales and property taxes on a federal return is $40,000 for tax year 2025, up from $10,000 the year before. The IRS’s 2025 Instructions for Schedule A and its Tax Information for Homeowners publication both open with the change. For a Boston homeowner who itemizes, that’s the cap that governs how much of the Massachusetts income tax and City of Boston property tax you paid can come off your taxable income.

Who it applies to

The cap only matters if you itemize deductions instead of taking the standard deduction. If you take the standard deduction, your state and local taxes don’t enter the calculation at all. Whether itemizing makes sense is a question for your tax preparer, and the answer can change from one year to the next.

The numbers

The overall limit is $40,000, or $20,000 if you’re married filing separately. It phases down once modified adjusted gross income passes $500,000 ($250,000 married filing separately). The IRS worksheet subtracts the threshold from that income, multiplies the difference by 30%, and takes that off the $40,000 cap. The result can’t go below $10,000 ($5,000 married filing separately), so the old cap is now the floor.

What counts toward the cap

The IRS’s deductible-taxes topic lists three categories: state and local income taxes (or general sales taxes, if you elect to deduct those instead of income taxes); state and local real property taxes, meaning taxes on real property levied for the general public welfare and charged uniformly across the jurisdiction; and state and local personal property taxes, which are taxes based only on the value of personal property such as a boat or car, charged on a yearly basis.

What doesn’t count

The same IRS page says you can’t deduct transfer taxes such as taxes imposed on the sale of property, stamp taxes, homeowner’s association fees, or service charges for water, sewer or trash collection. In practice that means the deeds excise paid at a Massachusetts closing, condo fees and a Boston water and sewer bill stay out of the SALT line.

Tax year 2026 and after

The statute, 26 U.S.C. § 164(b)(7), sets the cap at $40,400 for taxable years beginning in 2026, the return you’ll file next spring, with the phase-down threshold at $505,000. For years after 2026 and before 2030, both figures rise to 101 percent of the prior year’s amount, which is a 1% annual increase. For taxable years beginning after 2029, so from 2030 on, the cap returns to $10,000.

Two things to check

Pull your most recent return and see what your state and local taxes added up to before the cap was applied. Then ask your preparer whether itemizing beats the standard deduction for you this year. This is general information, not tax advice. Own in Boston and thinking about your next move? Let’s talk. Diana Kim, REALTOR®, eXp Realty.