State income tax is deductible on your federal return only if you itemize deductions, and only up to $10,000 per year
You cannot deduct state income tax if you take the standard deduction. The standard deduction is a flat amount the IRS lets you subtract from your income instead of listing individual deductions. For the 2024 tax year, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. Most people use the standard deduction because it is larger than what they would get by itemizing.
If you itemize deductions instead — meaning you list out specific expenses like state income tax, property taxes, mortgage interest, and charitable donations — then state income tax becomes deductible. But there is a cap: the SALT deduction limit (SALT stands for State and Local Taxes) caps your total deduction for state income tax, property tax, and sales tax combined at $10,000 per year. This limit has been in place since 2018 and is set to expire after the 2025 tax year unless Congress extends it.
Key Takeaways
- State income tax is only deductible if you itemize deductions on your federal tax return, which most people do not do.
- The $10,000 annual cap on state and local tax deductions applies whether you pay state income tax, property tax, sales tax, or a combination of all three.
- Married couples filing separately can each deduct up to $5,000 in state and local taxes, not $10,000 each.
- Whether itemizing makes sense depends on your total deductible expenses; a tax software or preparer can calculate this for your situation.
How to know if itemizing is worth it for you
To decide whether to itemize, add up all your potential deductions: state income tax, property taxes, sales tax (if you choose this instead of income tax), mortgage interest, charitable donations, and medical expenses above 7.5 percent of your income. If that total exceeds the standard deduction for your filing status, itemizing saves you money on your federal taxes.
Example: You are a single filer in 2024. Your standard deduction is $14,600. You paid $8,000 in state income tax, $4,000 in property tax, and gave $3,500 to charity. Your total itemized deductions are $15,500. Since $15,500 is more than $14,600, you would itemize and deduct the state income tax (along with the other expenses, up to the $10,000 SALT cap). In this case, your state income tax deduction would be $6,000 — the remaining room under the $10,000 cap after your $4,000 property tax.
If you had paid only $5,000 in state income tax and $3,000 in property tax, your total would be $11,500 in itemized deductions. You would still itemize because $11,500 exceeds $14,600 — wait, it does not. You would use the standard deduction instead, and none of your state income tax would be deductible.
The $10,000 SALT cap and how it works
The $10,000 limit applies to the combined total of state income tax, property tax, and sales tax. You do not get $10,000 for each type of tax. If you paid $8,000 in state income tax and $5,000 in property tax, you can only deduct $10,000 total, not $13,000.
You choose which taxes to count toward the limit. Most people deduct state income tax because it is usually larger than sales tax. Some states have no income tax (like Texas, Florida, and Tennessee), so residents in those states deduct property tax and sales tax instead. You cannot deduct both state income tax and sales tax in the same year — you pick one or the other, though the cap applies either way.
If you are married and file separately, each spouse gets a $5,000 cap, not $10,000 each. This almost always results in a smaller total deduction than filing jointly, which is one reason most married couples file together.
What happens after 2025
The $10,000 SALT cap is scheduled to expire on December 31, 2025, unless Congress votes to extend it. If it expires, the cap would disappear, and you could deduct all your state and local taxes without a limit — but only if you itemize. This is a major point of debate in tax policy, and the outcome depends on future legislation.
For now, plan based on the $10,000 limit for the 2024 and 2025 tax years. If you file your 2024 return in early 2025, the $10,000 cap still applies. Check back closer to the 2026 tax season if you want to know whether the cap has been extended.
State income tax deduction versus the standard deduction: a comparison
| Scenario | Standard Deduction | Itemized Deduction |
|---|---|---|
| Single filer, 2024 | $14,600 (no state income tax deduction) | Deduct state income tax up to $10,000 SALT cap, plus other deductions, if total exceeds $14,600 |
| Married filing jointly, 2024 | $29,200 (no state income tax deduction) | Deduct state income tax up to $10,000 SALT cap, plus other deductions, if total exceeds $29,200 |
| High state income tax, few other deductions | Usually better | May not be worth itemizing unless you have mortgage interest or large charitable donations |
| High state income tax plus mortgage interest and charity | Usually worse | Itemizing likely saves money |
Who benefits most from deducting state income tax
You benefit most from the state income tax deduction if you live in a high-income-tax state, own a home with a mortgage, and make charitable donations. States with the highest income tax rates include California (up to 13.3 percent), New York (up to 10.9 percent), New Jersey (up to 10.75 percent), and Oregon (up to 9.9 percent). Residents of these states are more likely to have enough itemized deductions to exceed the standard deduction.
You benefit least if you live in a state with no income tax, rent instead of own, or have few charitable donations. In those cases, you almost certainly use the standard deduction, and state income tax is not deductible at all.
How to report state income tax on your federal return
If you itemize, you report state income tax on Schedule A, which is the form you attach to your federal tax return (Form 1040) when you itemize. On Schedule A, line 5a asks for state income tax paid. You enter the amount you paid in state income tax during the year, up to the $10,000 SALT cap combined with property and sales tax.
Your state tax return shows how much state income tax you paid. If you had taxes withheld from your paycheck, your W-2 form (box 17) shows state income tax withheld. If you made estimated tax payments or paid when you filed your state return, add those amounts together. Tax software usually pulls this information automatically if you enter your state return details.
Frequently Asked Questions
Can I deduct state income tax if I take the standard deduction?
No. The standard deduction and itemized deductions are two separate paths. You choose one or the other. If you take the standard deduction, you cannot deduct state income tax, property tax, or other itemized expenses. You get the standard deduction amount and that is it.
What if I paid more than $10,000 in state income tax?
You can only deduct $10,000 total for state income tax, property tax, and sales tax combined. If you paid $12,000 in state income tax alone, you deduct $10,000 (assuming you itemize and have no other SALT expenses). The extra $2,000 cannot be deducted or carried forward to next year.
Do I deduct state income tax or sales tax, or both?
You choose one or the other, not both. Most people deduct state income tax because it is larger. You pick whichever is higher for your situation. The $10,000 cap applies to whichever you choose, and you cannot split it between the two.
If I am married filing separately, do I each get $10,000?
No. If you file separately, each spouse gets a $5,000 cap on state and local taxes, for a combined household limit of $10,000. Filing separately almost always results in a worse outcome than filing jointly. Consult a tax preparer if you are considering separate filing.
Will the $10,000 SALT cap go away?
The cap is set to expire after December 31, 2025, but Congress would need to vote to extend it. For now, assume the $10,000 limit applies to your 2024 and 2025 returns. Check back in late 2025 if you want to know whether it has been extended for future years.