The $40,000 SALT Cap is Here: Tracking State Taxes When You Actually Get the Deduction

finance_fred · February 6, 2026, 7:28pm

The One Big Beautiful Bill Act quadrupled the SALT deduction cap from $10,000 to $40,400 for 2026, and if you’re in a high-tax state, this could be worth thousands in tax savings. But here’s the catch: you need to itemize to claim it, and most Beancount users taking the standard deduction aren’t tracking their state and local taxes properly.

If you’ve been paying $25K in property taxes and $15K in state income taxes but taking the standard deduction because you were capped at $10K anyway, it’s time to rebuild your tracking. The math just changed.

What Changed: The SALT Cap Timeline

2017 (TCJA): SALT deduction capped at $10,000 (previously unlimited)
2025-2029: SALT cap raised to $40,000+ (OBBBA)

2025: $40,000
2026: $40,400
2027-2029: Increases 1% annually
2030+: Reverts to $10,000 cap

So you have a 5-year window (2025-2029) to maximize this expanded deduction before it sunsets.

Who Benefits: The Income Sweet Spot

The expanded cap applies only if your Modified Adjusted Gross Income (MAGI) is:

$500,000 or less (married filing jointly or single)
$250,000 or less (married filing separately)

The Phase-Out Formula

If you’re above $500K MAGI, your SALT deduction is reduced by $0.30 for every dollar above the threshold, but it never drops below the old $10,000 cap.

Example: $550K MAGI household

Over the threshold by: $50,000
Reduction: $50,000 × $0.30 = $15,000
Max SALT deduction: $40,400 - $15,000 = $25,400

Still better than the old $10K cap, but not the full $40,400.

What Counts as SALT (And What Doesn’t)

You can deduct:

State income tax (or state sales tax, but not both)
Local income tax (city, county taxes)
Real property taxes (primary residence, second home)
Personal property taxes (car registration if based on value)

You CANNOT deduct:

Federal income tax (never deductible)
Property taxes on rental properties (goes on Schedule E instead)
Sales tax AND income tax (pick one)
Foreign taxes (different deduction, Form 1116)

The Itemization Decision: Should You Switch?

The SALT cap increase only matters if you itemize. Here’s the break-even math:

2026 Standard Deduction

Married filing jointly: ~$30,000
Single: ~$15,000
Head of household: ~$22,500

To benefit from itemizing, your total itemized deductions (SALT + mortgage interest + charitable gifts + medical expenses over 7.5% AGI) must exceed the standard deduction.

Example: California Homeowner

State income tax:         $18,000
Property tax:             $15,000
Mortgage interest:         $8,000
Charitable donations:      $3,000
                          -------
Total itemized:           $44,000

Standard deduction (MFJ): $30,000
Benefit of itemizing:     $14,000
Tax savings (24% bracket): $3,360

This person should itemize. But without the SALT cap increase, they could only deduct:

SALT (capped at $10K):    $10,000
Mortgage interest:         $8,000
Charitable donations:      $3,000
                          -------
Total itemized:           $21,000

Standard deduction (MFJ): $30,000
Benefit of itemizing:     -$9,000 (WORSE)

Under the old cap, they’d take the standard deduction and lose tracking.

Beancount Tracking: What You Need

If you’re itemizing (or think you should be), your Beancount setup needs to capture all state and local taxes paid during the year.

1. State Income Tax Withholding

Track withholding from your W-2 paycheck:

2026-01-31 * "Employer" "January paycheck"
  Assets:Checking                      4,200 USD
  Income:Salary                       -6,000 USD
  Expenses:Taxes:Federal:Withholding   1,200 USD
  Expenses:Taxes:State:Withholding       450 USD  ; This counts for SALT!
  Expenses:Taxes:FICA                    450 USD

2. State Estimated Tax Payments

If you’re self-employed or have investment income:

2026-04-15 * "State Tax Board" "Q1 2026 estimated state tax"
  Expenses:Taxes:State:Estimated       2,500 USD
  Assets:Checking                     -2,500 USD
  salt_deductible: TRUE

3. Prior Year State Tax Paid in Current Year

If you owed state taxes for 2025 and paid them in April 2026:

2026-04-15 * "State Tax Board" "2025 tax balance due"
  Expenses:Taxes:State:PriorYear       1,800 USD
  Assets:Checking                     -1,800 USD
  tax_year: "2025"
  paid_in_year: "2026"
  salt_deductible: TRUE  ; Deductible in 2026 (year paid)

Important: SALT is deductible in the year paid, not the year it’s for. If you pay your 2025 state tax in April 2026, it counts toward your 2026 SALT deduction.

4. Property Taxes

Track real estate property tax payments:

2026-12-10 * "County Assessor" "2026 property tax - primary residence"
  Expenses:Taxes:Property:PrimaryHome  14,200 USD
  Assets:Checking                     -14,200 USD
  salt_deductible: TRUE

; If you have a second home
2026-12-15 * "County Assessor" "2026 property tax - vacation home"
  Expenses:Taxes:Property:SecondHome    6,500 USD
  Assets:Checking                      -6,500 USD
  salt_deductible: TRUE

; Rental property tax is NOT SALT (goes on Schedule E)
2026-12-20 * "County Assessor" "2026 property tax - rental property"
  Expenses:RentalProperty:PropertyTax   8,000 USD
  Assets:Checking                      -8,000 USD
  salt_deductible: FALSE  ; Schedule E, not SALT

5. Personal Property Tax (Vehicles)

Some states charge personal property tax on cars based on value:

2026-03-15 * "DMV" "Vehicle registration - 2024 Honda (value-based)"
  Expenses:Taxes:PersonalProperty:Vehicle  320 USD
  Assets:Checking                         -320 USD
  salt_deductible: TRUE

; Flat registration fees are NOT deductible
2026-03-15 * "DMV" "Registration fee (flat)"
  Expenses:Auto:Registration               85 USD
  Assets:Checking                         -85 USD
  salt_deductible: FALSE

6. Sales Tax vs Income Tax Choice

You can deduct state income tax OR sales tax, but not both. Most high-income filers choose income tax because it’s higher.

If you’re in a no-income-tax state (TX, FL, WA, etc.), track sales tax:

; Track large purchases for sales tax deduction
2026-06-10 * "Car Dealer" "New car purchase"
  Assets:Auto:Honda                    35,000 USD
  Liabilities:Loan:Auto               -30,000 USD
  Assets:Checking                      -5,000 USD

2026-06-10 * "Car Dealer" "Sales tax on vehicle"
  Expenses:Taxes:SalesTax:Vehicle       2,275 USD  ; 6.5% sales tax
  Liabilities:Loan:Auto                -2,275 USD
  salt_deductible: TRUE

For routine sales tax, use the IRS calculator instead of tracking every purchase.

Year-End SALT Deduction Summary

At the end of 2026, you need to total all SALT payments and cap them:

2026-12-31 note Expenses:Taxes "\
=== 2026 SALT DEDUCTION SUMMARY ===

State income tax withholding:         $18,450
State estimated tax payments:          $7,500
Prior year (2025) balance paid in 2026: $1,800
Property tax (primary residence):     $14,200
Property tax (vacation home):          $6,500
Personal property tax (vehicles):        $320
                                      -------
TOTAL SALT PAID:                      $48,770

2026 SALT cap:                        $40,400
MAGI:                                 $425,000 (under $500K threshold)

Deductible SALT (Schedule A):        $40,400 (capped)
Excess SALT (non-deductible):         $8,370

OTHER ITEMIZED DEDUCTIONS:
Mortgage interest:                     $9,200
Charitable contributions:              $4,100
Medical expenses (over 7.5% AGI):      $2,800
                                      -------
TOTAL ITEMIZED DEDUCTIONS:            $56,500

Standard deduction (MFJ):             $30,000
Benefit of itemizing:                 $26,500
Tax savings (24% bracket):            $6,360

CONCLUSION: Itemize
"

This gives you:

Total SALT paid (for your records)
Capped SALT deduction (what goes on Schedule A)
Itemized vs standard comparison (decision support)
Tax savings calculation (motivation)

Common Tracking Mistakes

Mistake #1: Not Separating State from Federal

Don’t lump all taxes into Expenses:Taxes:

BAD:

Expenses:Taxes:Withholding  ; Federal and state mixed

GOOD:

Expenses:Taxes:Federal:Withholding
Expenses:Taxes:State:Withholding
Expenses:Taxes:FICA

You need to isolate state taxes for SALT calculations.

Mistake #2: Counting the Wrong Year

SALT is deductible when paid, not when incurred.

If you pay your 2026 state taxes in April 2027, they’re deductible on your 2027 return, not 2026.

Track with metadata:

2027-04-15 * "State" "2026 tax balance due"
  Expenses:Taxes:State:PriorYear       2,100 USD
  Assets:Checking                     -2,100 USD
  tax_year: "2026"
  deductible_year: "2027"

Mistake #3: Including Rental Property Taxes

Property taxes on rental properties go on Schedule E, not Schedule A. They’re not subject to the SALT cap, but they’re also not part of the SALT deduction.

; NOT SALT (goes on Schedule E)
Expenses:RentalProperty:PropertyTax    8,000 USD

Mistake #4: Not Tracking When Under the Cap

Some people say “I’m nowhere near $40K in SALT, so I don’t track it.” Wrong.

You need to track ALL state and local taxes to:

Know if you should itemize
Calculate total itemized deductions
Project future years (income might change)

Even if you’re at $12K in SALT (under the cap), you need that number combined with mortgage interest and charitable gifts to decide whether to itemize.

Should You Prepay State Taxes?

Here’s an advanced strategy: if you’re close to the $40,400 cap in 2026 and expect to be over it in 2027, consider prepaying 2027 estimated taxes in December 2026 to maximize your 2026 deduction.

Example:

; Projected 2026 SALT: $38,000 (under cap)
; Q4 2027 estimated payment due in January: $3,000

; Option: Pay it early in December 2026
2026-12-15 * "State" "Q4 2027 estimated tax (prepaid)"
  Expenses:Taxes:State:Estimated       3,000 USD
  Assets:Checking                     -3,000 USD
  tax_year: "2027"
  deductible_year: "2026"

; Now your 2026 SALT deduction is $41,000
; You claim the cap: $40,400 (maxed out for 2026)

This bunches deductions into one year and shifts them forward.

BUT: Don’t prepay if you’re already at the cap — it’s wasted.

Query to Check If You Should Itemize

At the end of 2026, run this:

SELECT
  sum(position) as total_salt
WHERE
  account ~ 'Expenses:Taxes:(State|Property|PersonalProperty)'
  AND year = 2026

Then add:

Mortgage interest (from Form 1098)
Charitable donations (tracked in Beancount)
Medical expenses over 7.5% AGI

If the total exceeds your standard deduction (~$30K MFJ), itemize.

The Bottom Line

The SALT cap increase from $10K to $40.4K is a huge win for homeowners in high-tax states, but only if you itemize. And you can only itemize smartly if you’re tracking all your state and local taxes in Beancount.

If you’ve been taking the standard deduction and ignoring state tax tracking, 2026 is the year to rebuild your system. The tax savings could be $3,000-$6,000 annually, but only if your ledger captures the data.

Are you tracking SALT in your Beancount setup, or did you give up when it was capped at $10K?

finance_fred · February 6, 2026, 7:28pm

This is a game-changer for my FIRE calculations. I live in California (high state income tax + high property tax) and I’ve been taking the standard deduction since 2018 because the $10K SALT cap made itemizing pointless.

My 2025 SALT Reality Check

Here’s what I’ve been paying (and not deducting):

State income tax (CA): $16,200
Property tax (SF):     $13,800
Total SALT paid:       $30,000

Old cap:               $10,000
Wasted:                $20,000 of deductible expenses

With my mortgage interest at $11K and charitable donations at $2K, my total itemized deductions under the old cap would have been:

SALT (capped):         $10,000
Mortgage interest:     $11,000
Charitable:             $2,000
Total itemized:        $23,000

Standard deduction:    $30,000

Decision: Take standard (no benefit from itemizing)

New Math for 2026

With the $40,400 cap:

SALT (full amount):    $30,000  ; Not capped anymore!
Mortgage interest:     $11,000
Charitable:             $2,000
Total itemized:        $43,000

Standard deduction:    $30,000
Additional deduction:  $13,000
Tax savings (24%):     $3,120

That’s $3,120 in annual tax savings just from being able to claim my actual SALT. Over 5 years (2025-2029), that’s $15,600.

My Beancount Tracking Gap

Here’s my problem: I haven’t been tracking state taxes properly because I knew I’d take the standard deduction.

My current setup:

; I lump everything together
2025-01-31 * "Paycheck"
  Assets:Checking                      5,200 USD
  Income:Salary                       -7,500 USD
  Expenses:Taxes                       2,300 USD  ; Uh oh, all lumped

I have NO IDEA how much of that $2,300 was federal withholding vs state withholding vs FICA. I’d have to go back to my paystubs and reconstruct it.

Question 1: Can I Reconstruct from W-2?

My 2025 W-2 will show:

Box 17: State income tax withheld

Can I just create a single end-of-year entry in Beancount to record that?

2025-12-31 * "Adjustment" "2025 state tax withholding (from W-2)"
  Expenses:Taxes:Federal           -42,000 USD  ; Remove lumped amount
  Expenses:Taxes:FICA              -12,000 USD
  Expenses:Taxes:Federal:Withholding  42,000 USD  ; Re-categorize
  Expenses:Taxes:State:Withholding    16,200 USD  ; From W-2 Box 17
  Expenses:Taxes:FICA:Paid            12,000 USD
  ; Net effect: Splits out state from federal

Or do I need to go back and edit every single paycheck transaction from 2025?

Question 2: What About Property Tax Paid Through Escrow?

My mortgage servicer pays my property tax from an escrow account. I see the escrow payment leave my bank account monthly, but the actual property tax payment happens once or twice a year when the servicer pays the county.

How do I track this?

Current setup:

; Monthly mortgage payment (includes escrow)
2026-01-01 * "Mortgage Servicer" "January mortgage payment"
  Liabilities:Mortgage:Principal       800 USD
  Expenses:Interest:Mortgage         1,100 USD
  Expenses:Escrow:PropertyTax        1,150 USD  ; Escrow deposit
  Assets:Checking                   -3,050 USD

But the actual property tax payment is:

; Actual payment by servicer (I don't see this in my bank account)
2026-12-15 * "County" "Property tax payment (via escrow)"
  Expenses:Taxes:Property            13,800 USD
  Liabilities:Escrow:PropertyTax    -13,800 USD
  ; How do I record this if it's not in my bank statement?

Should I track escrow deposits monthly and then reconcile annually when I get the escrow statement? Or track both the deposit AND the payment?

Question 3: Sales Tax vs Income Tax

California has high income tax, so I should deduct income tax, not sales tax. But I bought a car in 2025 and paid $3,200 in sales tax on it.

Can I deduct that $3,200 in sales tax PLUS my state income tax? Or is it strictly either/or?

If it’s either/or, my state income tax ($16,200) is way higher than any sales tax I’d calculate, so I should just ignore sales tax tracking entirely, right?

Question 4: FIRE Implications

For my FIRE planning, the $40K SALT cap changes my tax burden significantly. I’ve been modeling my early retirement expenses using an effective tax rate that assumes the standard deduction.

If I can itemize with full SALT for 2025-2029, my effective rate drops from ~18% to ~15%. That’s 3 percentage points, which accelerates my FIRE date by about 8 months.

Should I be building two scenarios in my FIRE calculations?

2025-2029: Full SALT deduction (itemize)
2030+: $10K SALT cap (probably standard deduction again)

This matters because I might hit my FIRE number in 2028, but if the cap reverts in 2030, my retirement income math changes.

TL;DR: SALT cap increase saves me $3,120/year and accelerates FIRE by 8 months, but I need to fix my Beancount tracking to separate state from federal taxes. Can I reconstruct from W-2, or do I need to re-enter every paycheck?

accountant_alice · February 6, 2026, 7:28pm

@finance_fred - Great questions. Let me answer from the CPA perspective.

Can You Reconstruct from W-2? Yes.

You don’t need to re-enter every paycheck. A year-end adjustment is fine:

2025-12-31 * "Tax Reclassification" "Split lumped taxes per W-2"
  Expenses:Taxes                      -70,500 USD  ; Remove lumped
  Expenses:Taxes:Federal:Withholding   42,000 USD  ; W-2 Box 2
  Expenses:Taxes:State:Withholding     16,200 USD  ; W-2 Box 17
  Expenses:Taxes:FICA                  12,300 USD  ; W-2 Box 4 + Box 6

This is perfectly acceptable. The IRS doesn’t care HOW you track it, only that your Schedule A reflects the correct total state tax paid.

For 2026 going forward, split your paychecks properly so you don’t need year-end adjustments.

Escrow Property Tax: Track the Payment, Not the Deposit

The SALT deduction is based on when taxes are PAID to the taxing authority, not when you deposit into escrow.

Correct approach:

; Monthly: Escrow deposit (not deductible yet)
2026-01-01 * "Mortgage" "Escrow deposit"
  Liabilities:Mortgage:Principal       800 USD
  Expenses:Interest:Mortgage         1,100 USD
  Assets:Escrow:PropertyTax          1,150 USD  ; Asset, not expense
  Assets:Checking                   -3,050 USD

; Annual: Actual tax payment by servicer (THIS is deductible)
2026-12-15 * "County" "Property tax paid from escrow"
  Expenses:Taxes:Property:SALT       13,800 USD
  Assets:Escrow:PropertyTax         -13,800 USD

You’ll get an escrow statement from your mortgage servicer showing when they paid the county. Record that transaction even though it doesn’t appear in your bank account.

Sales Tax vs Income Tax: Either/Or

You CANNOT deduct both. Choose whichever is higher.

California income tax: $16,200
Sales tax (including car): $3,200

Deduct income tax. Ignore sales tax tracking entirely.

The only time you’d choose sales tax is if you live in a no-income-tax state (TX, FL, WA) or bought a very expensive item (car, boat, RV) that pushed sales tax above your income tax.

FIRE Planning: Model Both Scenarios

Absolutely build two scenarios:

Scenario A: 2025-2029 (SALT cap $40K+)

Effective tax rate: ~15%
FIRE target: $1.2M
Date: Mid-2028

Scenario B: 2030+ (SALT cap reverts to $10K)

Effective tax rate: ~18%
Might drop back to standard deduction
Higher withdrawal rate needed

The tax savings are TEMPORARY (5 years). Don’t assume permanent lower rates in your long-term FIRE calculations.

Consider this: if you’re planning to retire in 2028, you’ll enjoy the lower rate for 2 years, then it reverts. Budget conservatively for the post-2030 tax environment.

helpful_veteran · February 6, 2026, 7:29pm

I’ll add the “been there, done that” perspective from someone who’s been tracking SALT in Beancount since the cap was introduced in 2018.

The Escrow Reconciliation Pattern

For property taxes paid through escrow, I track BOTH the deposits and the payments, then reconcile annually.

Here’s my workflow:

Monthly escrow deposits (builds up the escrow asset):

open Assets:Escrow:PropertyTax

2026-01-01 * "Mortgage" "January payment"
  Liabilities:Mortgage:Principal       850 USD
  Expenses:Interest:Mortgage         1,200 USD
  Assets:Escrow:PropertyTax          1,100 USD  ; Accumulates
  Assets:Checking                   -3,150 USD

Annual property tax payment (converts escrow to expense):

2026-12-10 * "Escrow Statement" "2026 property tax paid"
  Expenses:Taxes:Property            13,200 USD  ; Schedule A SALT
  Assets:Escrow:PropertyTax         -13,200 USD

Escrow balance assertion:

2026-12-31 balance Assets:Escrow:PropertyTax    0 USD
; If this fails, your escrow deposits don't match the tax payment

This catches errors. If your servicer paid $13,200 in property tax but you only deposited $12,000 in escrow, the balance assertion fails and you know something’s wrong (maybe they pulled from surplus or you’re short).

The Paycheck Split: Automate It

Don’t manually split every paycheck. Write an importer that parses your paystub PDF and generates the split automatically.

I use pdftotext + a custom Python script:

# Simplified example
def parse_paystub(pdf_path):
    text = extract_text(pdf_path)
    return {
        'gross': extract_amount(text, 'Gross Pay'),
        'federal_withholding': extract_amount(text, 'Fed Tax'),
        'state_withholding': extract_amount(text, 'State Tax'),
        'fica': extract_amount(text, 'FICA'),
        'net': extract_amount(text, 'Net Pay')
    }

def generate_beancount(paystub_data, date):
    return f"""
{date} * "Employer" "Paycheck"
  Assets:Checking                      {paystub_data['net']} USD
  Income:Salary                       -{paystub_data['gross']} USD
  Expenses:Taxes:Federal:Withholding   {paystub_data['federal_withholding']} USD
  Expenses:Taxes:State:Withholding     {paystub_data['state_withholding']} USD
  Expenses:Taxes:FICA                  {paystub_data['fica']} USD
"""

Run this monthly, paste the output into your ledger. No manual entry.

The $500K Phaseout: How It Actually Works

If your income is climbing toward $500K, you need to track the phaseout more carefully.

The formula:
SALT deduction = min($40,400, max($10,000, $40,400 - ($MAGI - $500,000) × 0.30))

2026-12-31 note Expenses:Taxes "\
=== SALT DEDUCTION WITH PHASEOUT ===

MAGI: $520,000
Over threshold: $20,000
Reduction: $20,000 × 0.30 = $6,000

SALT paid: $45,000
SALT cap (before phaseout): $40,400
Phaseout reduction: $6,000
Final SALT deduction: $34,400

Comparison to $10K cap: +$24,400 benefit
"

Even with the phaseout, you’re WAY better off than the $10K cap.

State-Specific Gotchas

California: SDI is NOT deductible as SALT

California State Disability Insurance (SDI) withholding shows up on your paystub, but it’s NOT deductible as a state tax. It’s a social insurance premium, like unemployment insurance.

Only deduct:

CA income tax (state withholding)
CA local taxes (if any)

Do NOT deduct:

SDI (not a tax)
UI (not a tax)

New York: PTET Workaround

NY has a Pass-Through Entity Tax (PTET) workaround for the SALT cap. If you own an S-corp or partnership, the entity can pay state taxes and deduct them at the entity level (bypassing the SALT cap on personal returns).

This is complex and beyond Beancount tracking, but worth mentioning if you’re a business owner near the cap.

The 2030 Sunset: Prepay Strategy

In late 2029, if you’re close to the cap, consider prepaying January 2030 estimated taxes in December 2029 to squeeze one more year of full SALT benefit.

2029-12-15 * "State" "Q4 2029 + Q1 2030 estimated (prepaid)"
  Expenses:Taxes:State:Estimated       6,000 USD  ; 2 quarters
  Assets:Checking                     -6,000 USD

; Claim on 2029 return (before cap reverts to $10K)

This bunches $6K of future tax into 2029 when the cap is still $40K+, potentially saving $1,000+ in taxes compared to paying in 2030 when the cap is back to $10K.

My Year-End SALT Checklist

Every December, I run this:

Query total state taxes paid (withholding + estimated)
Check property tax payment dates (only count if paid by Dec 31)
Verify escrow statement matches my ledger
Calculate total SALT and compare to cap
Decide if I should prepay Q1 next year estimated tax
Project total itemized deductions vs standard

It takes 30 minutes and prevents surprises at tax time.

newbie_accountant · February 6, 2026, 7:29pm

One practical question on the escrow reconciliation pattern that @helpful_veteran mentioned:

My mortgage servicer (Wells Fargo) pays my property tax twice a year - once in December for the first half, once in April for the second half. But my county bills on a fiscal year (July 1 - June 30), so the December payment is for July-December of the CURRENT year, and the April payment is for January-June of the NEXT year.

Which year do I deduct each payment?

For example:

December 2026 payment: Covers July-Dec 2026 tax bill
April 2027 payment: Covers Jan-Jun 2027 tax bill

I think both should be deductible in the year PAID (2026 for December payment, 2027 for April payment), regardless of what period they cover. Is that correct?

Proposed tracking:

; December payment (deductible in 2026)
2026-12-10 * "Escrow Statement" "Property tax paid - 1st installment"
  Expenses:Taxes:Property            6,900 USD  ; Schedule A 2026
  Assets:Escrow:PropertyTax         -6,900 USD
  tax_period: "2026-07 to 2026-12"
  deductible_year: "2026"

; April payment (deductible in 2027, not 2026)
2027-04-15 * "Escrow Statement" "Property tax paid - 2nd installment"
  Expenses:Taxes:Property            6,900 USD  ; Schedule A 2027
  Assets:Escrow:PropertyTax         -6,900 USD
  tax_period: "2027-01 to 2027-06"
  deductible_year: "2027"

This matters because if I’m near the $40,400 cap in 2026, I can’t “pull forward” the April 2027 payment into December 2026 to claim more SALT - the county sets the payment schedule, not me.

Second question: What about supplemental property tax bills?

California sends supplemental tax bills when you buy a house (due to Prop 13 reassessment). I bought my house in August 2026 and got a $4,200 supplemental bill in November 2026, due February 2027.

If I pay it early in December 2026, can I claim it on my 2026 return? Or does the “due date” matter?

; Supplemental bill - early payment
2026-12-20 * "County" "Supplemental property tax (early payment)"
  Expenses:Taxes:Property:Supplemental  4,200 USD
  Assets:Checking                      -4,200 USD
  due_date: "2027-02-01"
  paid_date: "2026-12-20"
  deductible_year: "2026"  ; Or 2027?

My guess: I can deduct it in 2026 because I PAID in 2026, even though it wasn’t due until 2027. This would let me use more of the $40,400 cap before it sunsets.

Is that strategy legit, or does the IRS care about the due date?