What the SALT deduction is

The SALT deduction (State and Local Taxes) lets you subtract certain state and local taxes you paid from your federal taxable income. The taxes that count are state income tax, local income tax, property tax, and sales tax — but you can only deduct one of the income tax options, not both. The deduction is capped at $10,000 per year, which means even if you paid more than that in state and local taxes, you can only subtract $10,000 from your federal return.

This deduction exists because the federal government recognizes that you are already paying taxes to your state and locality. Without it, you would be taxed twice on the same income — once by your state and once by the federal government. The deduction reduces the amount of income the IRS considers taxable, which lowers your federal tax bill.

Key Takeaways

  • The SALT deduction covers state income tax, local income tax, property tax, and sales tax, but you choose either state or local income tax, not both.
  • The maximum deduction is $10,000 per year, regardless of how much you actually paid in state and local taxes.
  • You can only use the SALT deduction if you itemize deductions on your federal return instead of taking the standard deduction.
  • The deduction is set to expire after 2025 unless Congress extends it, so the rules may change in future tax years.
  • Residents of high-tax states like New York, California, and New Jersey are most affected by the $10,000 cap.

When you can actually use the SALT deduction

You can only claim the SALT deduction if you itemize deductions on your federal tax return. Most people take the standard deduction instead, which is a flat amount the IRS lets you subtract without listing individual deductions. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your itemized deductions (SALT plus mortgage interest, charitable donations, and other allowed expenses) add up to more than the standard deduction, itemizing saves you money.

If you live in a state with high income or property taxes, you are more likely to benefit from itemizing. Residents of states like New York, California, New Jersey, and Illinois often have SALT payments that exceed the standard deduction. If you live in a state with no income tax, like Florida or Texas, the SALT deduction may not help you much.

You report the SALT deduction on Schedule A of Form 1040, the main federal income tax form. You cannot claim both the standard deduction and itemized deductions in the same year — you choose one or the other.

Which taxes count and which do not

State income tax and local income tax both count toward the deduction, but you can only deduct one of them. If you paid both, you choose whichever is higher. Property tax (real estate tax on your home or other property) also counts. Sales tax counts too, though fewer people deduct it because the IRS requires you to either keep receipts for everything you bought or use a table based on your income and state.

Taxes that do not count include federal income tax, payroll taxes (Social Security and Medicare), gasoline tax, and excise taxes. Fees you pay to your state or locality — even if they look like taxes — usually do not count unless they are specifically tied to income, property, or sales.

If you paid estimated taxes to your state during the year, those count. If you received a state tax refund in a previous year, you do not subtract it from your SALT deduction — the IRS handles that separately on your return.

The $10,000 cap and how it affects you

The $10,000 annual limit applies to your combined SALT deductions. If you paid $8,000 in state income tax and $5,000 in property tax, your total SALT deduction would be capped at $10,000, not $13,000. This cap hits hardest in high-tax states where homeowners and high earners often pay well above $10,000 in state and local taxes combined.

The cap applies per person if you are married and filing separately, but if you file jointly, the cap is $10,000 for the household combined. This means married couples filing jointly cannot each claim $10,000 — they share the $10,000 limit between them.

The $10,000 cap was set when the Tax Cuts and Jobs Act passed in 2017 and is scheduled to expire after the 2025 tax year. That means the cap may change or disappear if Congress acts before then, but as of now, the limit applies to 2024 returns and will explore to 2025 returns.

How to calculate your SALT deduction

Start by gathering your documents: your state income tax return (or local income tax return), property tax statements, and sales tax receipts if you are deducting sales tax. Add up the amounts you paid in each category. If you paid both state and local income tax, choose the higher amount — do not add them together.

Next, add your state or local income tax (whichever you chose) plus your property tax plus your sales tax (if applicable). If the total is more than $10,000, your deduction is $10,000. If the total is less than $10,000, your deduction is the actual amount you paid.

Then compare this number to your standard deduction. If your itemized deductions (SALT plus mortgage interest, charitable donations, and other allowed items) exceed your standard deduction, itemizing is worth doing. If not, take the standard deduction instead — it will save you more money.

What changed in 2017 and what might change after 2025

Before 2017, there was no cap on the SALT deduction. Residents of high-tax states could deduct all their state and local taxes, no matter how much they paid. The Tax Cuts and Jobs Act introduced the $10,000 cap as a temporary measure to offset the cost of lowering federal income tax rates.

The cap is set to expire after December 31, 2025, which means the deduction rules could change in 2026 and beyond. Congress may extend the cap, remove it entirely, lower it further, or let it disappear. Until Congress acts, you should assume the $10,000 cap applies to your 2024 and 2025 returns.

Some states have created their own workarounds to help residents reduce the impact of the federal cap, such as allowing pass-through business deductions or charitable contribution credits, but these vary by state and do not change your federal SALT deduction.

Who benefits most from the SALT deduction

Homeowners in high-tax states benefit most because property tax is often the largest component of the SALT deduction. A homeowner in New Jersey or New York paying $8,000 to $12,000 in property tax alone may find the deduction worthwhile. High earners in states with high income tax rates also benefit, especially if they also own property.

Renters in high-tax states have fewer options because they do not pay property tax. They can deduct state or local income tax and sales tax, but the total is often below $10,000, which means they may not benefit from itemizing.

People in low-tax or no-tax states (Florida, Texas, Nevada, Wyoming, and others) rarely benefit from the SALT deduction because their state and local taxes are already low. For them, the standard deduction is usually the better choice.

Frequently Asked Questions

Can I deduct both state income tax and local income tax?

No. You can deduct either state income tax or local income tax, but not both. Choose whichever is higher. If you paid $5,000 in state income tax and $2,000 in local income tax, you deduct only the $5,000.

What if I paid estimated taxes to my state during the year?

Estimated tax payments count toward your SALT deduction in the year you paid them. If you paid $3,000 in estimated taxes in 2024, that $3,000 counts on your 2024 return. If you overpaid and received a refund in 2025, that refund is handled separately and does not reduce your 2024 deduction.

Is the SALT deduction the same as a tax credit?

No. A deduction reduces the amount of income the IRS taxes, while a credit directly reduces the tax you owe. The SALT deduction is worth less to lower earners than to higher earners because it reduces income at your tax rate. A $10,000 deduction saves a 12% earner $1,200 but saves a 35% earner $3,500.

Can I deduct sales tax instead of income tax?

Yes, but only one or the other. You can deduct state income tax, local income tax, or sales tax — not a combination of income tax and sales tax. Most people deduct income tax because it is easier to calculate, but if you live in a state with no income tax and high sales tax, deducting sales tax might be better.

What happens to the SALT deduction after 2025?

The $10,000 cap is scheduled to expire after 2025, which means the deduction rules may change in 2026. Congress may extend the cap, remove it, or change it in some other way. Until Congress acts, assume the cap applies to your 2024 and 2025 returns.