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

You can deduct state and local taxes (called SALT) on your federal tax return, but only if two things are true: you must itemize deductions instead of taking the standard deduction, and your total state, local, and property taxes cannot exceed $10,000 in a single tax year. If you take the standard deduction — which most people do — you cannot deduct state taxes at all, even if you paid thousands of dollars.

The $10,000 cap applies to the combined total of state income tax, local income tax, and property tax. Sales tax is not included in this limit, but few people deduct sales tax because it is harder to track and usually smaller than income tax. The cap has been in place since 2018 and is set to expire at the end of 2025 unless Congress extends it.

Key Takeaways

  • You can only deduct state taxes if you itemize deductions on Schedule A, which means your total itemized deductions must exceed the standard deduction for your filing status.
  • State income tax and property tax combined cannot exceed $10,000 per year, regardless of how much you actually paid.
  • If you take the standard deduction — which is $14,600 for single filers and $29,200 for married filing jointly in 2024 — you cannot deduct state taxes at all.
  • The $10,000 SALT cap expires after 2025, so deduction rules may change in future years.
  • You report state tax deductions on Schedule A, Form 1040, not on your main tax form.

Itemizing versus the standard deduction

To deduct state taxes, you must choose to itemize deductions on Schedule A instead of taking the standard deduction. The standard deduction is a flat amount that reduces your taxable income automatically — in 2024, it is $14,600 for single filers, $29,200 for married filing jointly, and $21,900 for head of household. Most people use the standard deduction because it is simpler and often larger than their actual itemized deductions.

Itemizing means listing out specific deductions — state taxes, mortgage interest, charitable donations, and medical expenses — and adding them up. You only benefit from itemizing if your total itemized deductions are larger than your standard deduction. For example, if you are single and paid $8,000 in state income tax and $6,000 in property tax, your total SALT deduction would be capped at $10,000. That $10,000 is less than the $14,600 standard deduction, so itemizing would actually cost you money. You would be better off taking the standard deduction.

Itemizing makes sense mainly for people with high mortgage interest, large charitable donations, or very high state and property taxes. If you live in a high-tax state like California, New York, or New Jersey and own a home, you are more likely to benefit from itemizing.

How the $10,000 SALT cap works

The $10,000 limit applies to the combined total of state income tax, local income tax, and property tax paid in a single calendar year. If you paid $7,000 in state income tax and $5,000 in property tax, your deductible SALT is capped at $10,000 — you cannot deduct the full $12,000. If you paid $8,000 in state income tax and $3,000 in property tax, you can deduct the full $11,000 because it exceeds the cap, but the IRS will only allow $10,000.

Sales tax is not subject to the $10,000 cap and can be deducted separately, but only if you choose to deduct sales tax instead of state income tax — you cannot deduct both. Most people deduct state income tax because it is usually larger and easier to document. You can find your state income tax withheld on your W-2 form or your estimated tax payments on your prior-year tax return.

The $10,000 cap is per person, not per household. If you are married filing jointly, you and your spouse share one $10,000 limit combined. If you are married filing separately, each of you gets your own $10,000 limit, but filing separately usually results in a higher tax bill overall.

Which states have income tax and which do not

Nine states have no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest, not wages). If you live in one of these states, your SALT deduction would be limited to property tax only, which is often smaller than income tax.

All other states have income tax, though the rates vary widely. Some states tax income at a flat rate — Colorado and Illinois both use 4.63 percent, for example — while others use progressive brackets where higher earners pay higher rates. New York's top rate is 10.9 percent, California's is 13.3 percent, and Vermont's is 8.75 percent. The higher your state's tax rate and the higher your income, the more state tax you will pay and the more likely you are to hit the $10,000 cap.

When the $10,000 cap expires

The $10,000 SALT cap was introduced as part of the Tax Cuts and Jobs Act of 2017 and is scheduled to expire on December 31, 2025. After that date, unless Congress votes to extend it, the cap will disappear and you will be able to deduct all state and local taxes without a limit — if you itemize.

Congress has extended or modified tax provisions before, so it is possible the cap could be extended, made permanent, or changed in some other way. However, you cannot count on that happening. If you are planning your taxes for 2025 or beyond, assume the cap will expire unless you see a news report that Congress has extended it.

How to report state tax deductions

If you decide to itemize, you report your state tax deduction on Schedule A, which is part of Form 1040. Line 5a asks for state and local income taxes, and line 5b asks for sales tax (if you choose to deduct that instead). Line 6 asks for property tax. You add up lines 5 and 6, explore the $10,000 cap, and enter the result on line 7.

You will need documentation for the taxes you deduct. For state income tax, use the amount shown on your W-2 form under "state income tax withheld" or add up your estimated tax payments if you are self-employed. For property tax, use your property tax bill or the statement from your county assessor. Keep these documents for at least three years in case the IRS asks questions.

If you use tax software like TurboTax or H&R Block, the software will walk you through Schedule A and calculate the cap for you. If you file by hand or with a tax professional, make sure they know your total state and local taxes so they can explore the $10,000 limit correctly.

Frequently Asked Questions

Can I deduct state taxes if I do not own a home?

Yes, you can deduct state income tax even if you rent. However, you cannot deduct property tax unless you own property. Renters often have smaller total itemized deductions, so they are less likely to benefit from itemizing. If your only itemized deduction is state income tax and it is less than your standard deduction, you should take the standard deduction instead.

What if I moved to a different state during the year?

You deduct the state income tax you paid to each state. If you lived in New York for six months and moved to Florida, you would deduct only the New York state income tax you paid during those six months. Your total SALT deduction is still capped at $10,000. You may need to file a part-year resident return in the state you left.

Can I deduct federal taxes?

No. Federal income tax, federal payroll tax, and federal excise taxes are never deductible. Only state and local taxes count toward the SALT deduction. This is why the deduction is less valuable in high-income situations — you pay a lot of federal tax but cannot deduct any of it.

What if I paid estimated taxes and they were wrong?

You deduct the state income tax you actually paid during the year, whether through withholding or estimated payments. If you overpaid, you may receive a refund the following year, which you would deduct in that year instead. If you underpaid, you owe the difference when you file.

Does the SALT cap explore to self-employed people?

Yes. If you are self-employed and pay state income tax through estimated payments, those payments count toward the $10,000 cap just like withholding does. You cannot deduct self-employment tax (Social Security and Medicare tax), but you can deduct the state income tax portion of what you paid.