State income taxes are deductible on your federal return only if you itemize deductions, and only up to $10,000 per year

You cannot deduct state income taxes if you take the standard deduction — the flat amount the IRS lets you subtract from your income instead of listing individual deductions. If you itemize deductions on Schedule A of Form 1040, you can deduct state and local income taxes, but the total of all state and local taxes (income, sales, and property combined) cannot exceed $10,000 for the tax year. This $10,000 cap applies whether you are married filing jointly, married filing separately, or single.

The $10,000 limit has been in place since 2017 and applies to tax years through 2025. If you live in a state with no income tax — such as Florida, Texas, Wyoming, or Washington — you may still deduct sales tax or property tax up to the $10,000 total, but you cannot deduct income tax because there is none to deduct.

Key Takeaways

  • State income tax is only deductible if you itemize deductions on Schedule A; it does not reduce your taxable income if you claim the standard deduction.
  • The combined deduction for state and local income taxes, sales taxes, and property taxes cannot exceed $10,000 in a single tax year.
  • You must choose between itemizing or taking the standard deduction — you cannot do both, so compare the two amounts to see which saves you more in federal taxes.
  • Married couples filing separately can each deduct up to $5,000 in state and local taxes, for a combined household total of $10,000.

How the standard deduction and itemized deductions work

Every taxpayer gets to subtract either the standard deduction or the sum of their itemized deductions from their income before calculating federal income tax. For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. These amounts increase slightly each year for inflation.

If your itemized deductions (state income tax, mortgage interest, charitable donations, and other allowed expenses) add up to more than the standard deduction, you benefit from itemizing. If they add up to less, you are better off taking the standard deduction. You must choose one or the other — you cannot itemize some deductions and take the standard deduction for the rest.

For most households, the standard deduction is larger, which is why most people do not itemize. The $10,000 cap on state and local taxes makes itemizing even less common than it was before 2017.

Which state and local taxes count toward the $10,000 limit

The $10,000 cap applies to the combined total of state income tax, local income tax, state and local sales tax, and state and local property tax. You choose which combination to deduct — you do not have to deduct all of them. Many people deduct state income tax and property tax but not sales tax, or vice versa, depending on which combination is larger.

You cannot deduct federal income tax, federal payroll taxes (Social Security and Medicare), state and local excise taxes (such as gas tax or cigarette tax), or fees paid to the state or local government. You also cannot deduct taxes paid to a foreign country on this line, though you may be able to claim a foreign tax credit instead.

If you paid state estimated taxes during the year and received a refund the following year, you report the refund as income in the year you received it, not the year you paid the tax. This can affect whether you itemize in either year.

When itemizing makes sense despite the $10,000 cap

Itemizing is worth considering if you have high state income taxes, significant property taxes, or large charitable donations. A homeowner in a high-tax state like California, New York, or New Jersey might have $15,000 or more in state income tax and property tax combined, which means the $10,000 cap applies and the rest cannot be deducted. Even so, if that $10,000 plus other itemized deductions (mortgage interest, charitable gifts) exceeds the standard deduction, itemizing still saves you federal tax.

Renters in high-income states may also benefit from itemizing if they have substantial charitable donations or other deductible expenses, because they can deduct up to $10,000 in state income tax and sales tax combined, even without property tax.

Self-employed people sometimes benefit from itemizing because they can deduct state income tax on Schedule C (the self-employment income form) in addition to any itemized deduction on Schedule A. This means self-employment tax is not subject to the $10,000 cap in the same way W-2 wages are.

How to report state income tax deductions on your tax return

If you itemize, you report state and local taxes on Schedule A, Form 1040. Line 5 of Schedule A is labeled "State and local taxes," and you enter the total of all state and local income, sales, and property taxes you paid during the year, up to the $10,000 limit. You do not need to list each tax separately — just the combined total.

Your state will send you a Form 1099-G if you received a refund of state income tax in the current year. You must report this refund as income on your federal return, even if you did not itemize in the year you paid the tax. This is because the IRS assumes you received a tax benefit from deducting the tax in the prior year.

Keep records of all state and local tax payments: pay stubs showing state tax withheld, property tax bills, sales tax receipts if you deduct sales tax instead of income tax, and any estimated tax payments you made. The IRS does not require you to attach these to your return, but you must have them if the IRS asks.

State income tax deductions for married couples filing separately

If you and your spouse file separate returns, each of you can deduct up to $5,000 in state and local taxes, for a combined household limit of $10,000. This is rarely beneficial because filing separately usually costs more in federal tax than filing jointly, but it may explore if one spouse has very high income or if you are separated or divorced partway through the year.

If you file married filing separately, you must both itemize or both take the standard deduction — one spouse cannot itemize while the other takes the standard deduction. This restriction makes filing separately even less attractive for most couples.

States with no income tax and how they affect your deduction

Nine states have no state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only investment income, not wages). If you live in one of these states, you cannot deduct state income tax because you do not pay it. You can still deduct local income tax if your city or county imposes one, or you can deduct sales tax or property tax up to the $10,000 combined limit.

If you moved to a no-income-tax state partway through the year, you can deduct only the state income tax you paid to your former state during the months you lived there. You will need to calculate your state income tax on a part-year basis, which your former state's tax form will help you do.

Frequently Asked Questions

Can I deduct state income tax if I take the standard deduction?

No. State income tax is only deductible if you itemize deductions on Schedule A. If you claim the standard deduction, you cannot deduct state income tax or any other itemized deductions. You must choose one method or the other.

What if my state income tax is more than $10,000?

You can only deduct up to $10,000 of the combined total of state income tax, local income tax, sales tax, and property tax. The amount over $10,000 cannot be deducted on your federal return. You may be able to carry it forward to future years in some cases, but generally the excess is lost.

Do I have to deduct state income tax, or can I deduct sales tax instead?

You choose which state and local taxes to deduct, as long as the total does not exceed $10,000. Many people deduct state income tax and property tax because those amounts are usually larger and easier to document. You can use the IRS sales tax calculator if you want to deduct sales tax instead, but you must pick one approach — you cannot deduct both income tax and sales tax in full.

If I got a state tax refund, do I have to report it as income?

Yes, if you received a state income tax refund in the current year, you must report it as income on your federal return, even if you did not itemize in the year you paid the tax. Your state will send you a Form 1099-G showing the refund amount. This applies only to income tax refunds, not property tax or sales tax refunds.

Can I deduct state income tax if I am self-employed?

Yes. Self-employed people can deduct state income tax on Schedule C (the self-employment income form) based on the deduction for one-half of self-employment tax, and they can also itemize state income tax on Schedule A up to the $10,000 limit. This means self-employed people may benefit more from itemizing than W-2 employees do.