For most of the last several years, the standard deduction has quietly won for the vast majority of filers, because the 2017 tax law capped state and local tax (SALT) deductions at $10,000 — a cap that a lot of homeowners in higher-tax states blew past just on property tax alone, making itemizing pointless beyond that cap. The OBBBA changed the math for 2026 by raising that cap to $40,400. For some filers, itemizing is suddenly worth a second look.
The old $10,000 SALT cap, and why it flattened itemizing
SALT — state and local taxes — covers the property tax you pay on your home, plus either your state income tax or state sales tax (you choose whichever is higher, not both). Before 2018, this was uncapped; the 2017 Tax Cuts and Jobs Act capped it at $10,000, which for a homeowner in a state like New Jersey or California with property tax alone often exceeding that number, meant a huge chunk of real, paid taxes simply couldn't be deducted at all — flattening the incentive to itemize.
The new $40,400 cap, and its own phase-out
The OBBBA raised the SALT cap to $40,000 for 2025, increasing 1% a year through 2029 — $40,400 for 2026. That's a real difference for a homeowner paying, say, $18,000 in property tax and state income tax combined: previously capped at deducting $10,000 of it, they can now deduct the full $18,000. But the higher cap phases out for high earners: it shrinks by 30% of MAGI above $500,000, bottoming out at the original $10,000 floor once MAGI reaches $600,000. It's also scheduled to revert entirely to the $10,000 cap after 2029 unless Congress acts again.
The actual flip point, worked through
Take a married couple filing jointly with a $32,200 standard deduction available. If their mortgage interest is $12,000/year and their property tax plus state income tax total $14,000 (all fully deductible now, under the $40,400 cap), their itemized total is $26,000 — still less than the $32,200 standard deduction, so they should still take the standard deduction. Now suppose their property tax and state income tax total $22,000 instead (common in high-tax states or on a more expensive home): itemized total becomes $34,000, which finally beats the $32,200 standard deduction by $1,800. That $1,800 gap is the actual benefit of itemizing in that scenario — not the full SALT amount, just the amount by which itemizing exceeds the standard deduction.
Common mistakes
The most common mistake is assuming the SALT cap increase automatically helps you — it only matters if your itemized total, INCLUDING mortgage interest and charitable giving, actually exceeds your standard deduction; many filers with SALT under $10,000 anyway see zero benefit from the higher cap. The second is forgetting the high-earner phase-out exists, which claws the benefit back for MAGI over $500,000. The third is not recalculating every year — with the cap rising 1% annually through 2029 and reverting after that, whether itemizing wins for you can change from year to year even if nothing else about your finances does.