Understanding the State & Local Income Tax (SALT) Deduction

The State and Local Tax (SALT) deduction allows taxpayers who itemize their federal tax returns to deduct certain taxes paid to state and local governments. For those navigating complex tax landscapes – especially in higher-tax states – this deduction can offer meaningful relief.

What You Can Deduct

Under the SALT provision, itemizing taxpayers may deduct the following:

• State and local income taxes, or state and local sales taxes (but not both)
• State and local property taxes
• Personal property taxes – such as those on vehicles or boats – if assessed annually based on value

To claim this deduction, you must forgo the standard deduction and choose to itemize. Most taxpayers select the option that provides the greater tax benefit – itemized deductions or the standard deduction.

The $10,000 Cap

Prior to 2018, there was no limit on how much you could deduct for state and local taxes. That changed with the Tax Cuts and Jobs Act (TCJA), which capped the SALT deduction at $10,000 ($5,000 for married couples filing separately). This cap is currently scheduled to remain in effect through 2025.

There have been efforts to revisit this cap. Most recently, in May 2025, the House of Representatives passed a bill to raise the limit to $40,000, with a phaseout for incomes over $500,000. However, the proposal still faces uncertainty in the Senate.

Will You Benefit?

Whether the SALT deduction helps lower your tax bill depends on your broader financial picture. To benefit, your total itemized deductions – including SALT, mortgage interest, charitable contributions, and other qualified expenses – must exceed the standard deduction. For 2025, the standard deduction is $15,000 for single filers and $30,000 for married couples filing jointly. If your itemized deductions fall below these thresholds, the standard deduction may be more advantageous.

Who Stands to Gain the Most

The SALT deduction is especially relevant for:

• Taxpayers in high-tax states like New York, New Jersey, California, and Connecticut, where state and local tax bills often exceed $10,000
• Higher-income households, who are more likely to itemize and face substantial tax liabilities

Before the TCJA, nearly 30% of taxpayers claimed the SALT deduction. That number has since dropped below 10%, with the majority of benefits now concentrated among households earning over $200,000 annually.

Why It Matters

The SALT deduction plays an important role in reducing the effects of double taxation – ensuring you aren’t taxed twice on the same income. For those who qualify, it can result in thousands of dollars in federal tax savings. And because it disproportionately impacts higher earners in high-tax states, it remains a key point of debate in tax policy discussions.

A Practical Example

Consider a single taxpayer who, in 2024, paid $8,000 in state income taxes and $4,000 in property taxes. Despite paying $12,000 in total, they may only deduct $10,000 under the current cap. If their total itemized deductions exceed the standard deduction, itemizing could lead to a lower tax bill.

Key Takeaways

• The SALT deduction allows up to $10,000 in state and local tax deductions if you itemize.
  
  
• It tends to benefit higher earners in high-tax states.
  
  
• You must itemize deductions to claim it; most filers now use the standard deduction.
  
  
• The cap is scheduled to expire after 2025, but legislative changes remain possible.
  
  
• Proposed increases to the cap would primarily impact higher earners in high-tax states.
  
  

Understanding the mechanics and implications of the SALT deduction can help you make smarter, more strategic decisions at tax time – particularly as lawmakers continue to debate its future.