The SALT deduction lets you subtract state and local taxes from your federal taxable income

SALT stands for state and local taxes. On your federal tax return, you can deduct the total amount you paid in state income tax, property tax, and sales tax — but only if you itemize deductions instead of taking the standard deduction. The deduction is capped at $10,000 per year, which means you cannot deduct more than that amount no matter how much you actually paid.

The $10,000 cap has been in place since 2018 and is set to expire at the end of 2025 unless Congress extends it. After that date, the limit would rise to $5,000 (or $2,500 if married filing separately) unless the law changes again. This cap applies to your combined state income tax, property tax, and sales tax — you cannot split the limit among them.

Key Takeaways

  • You can only use the SALT deduction if you itemize deductions on your federal return; most people use the standard deduction instead and get no benefit from SALT.
  • The deduction covers state income tax, property tax, and sales tax combined, up to $10,000 per year.
  • The $10,000 cap expires at the end of 2025, after which the limit drops to $5,000 unless Congress votes to extend it.
  • High-income earners and people in high-tax states like California, New York, and New Jersey are most likely to benefit from itemizing and using the SALT deduction.

How the SALT deduction works on your tax return

When you file your federal tax return, you choose between two paths: the standard deduction or itemized deductions. The standard deduction is a flat amount that reduces your taxable income — for 2024, it is $14,600 for single filers and $29,200 for married couples filing jointly. Most people use the standard deduction because it is simpler and often larger than their actual deductions.

If you itemize instead, you add up all your deductible expenses — mortgage interest, charitable donations, medical expenses, and SALT — and deduct that total. You only benefit from the SALT deduction if your itemized total exceeds the standard deduction. For example, if you are single, you would need itemized deductions totaling more than $14,600 to make itemizing worth it. If your SALT alone is $8,000 but you have no other deductions, itemizing does not help you because $8,000 is less than $14,600.

Which taxes count toward the SALT deduction

The SALT deduction covers three types of taxes: state income tax, local income tax, and property tax. You add these three together and can deduct up to $10,000 of the combined total. Sales tax also counts, but only if you choose to deduct sales tax instead of state income tax — you cannot deduct both.

State income tax is what you pay to your state based on your wages and other income. Property tax is what you pay to your county or municipality on real estate you own. Local income tax applies in some cities and counties on top of state income tax. Sales tax is the tax added at checkout when you buy goods; you can deduct the actual sales tax you paid if you have receipts, or use IRS tables based on your income and state.

Taxes that do not count include federal income tax, payroll taxes (Social Security and Medicare), excise taxes, and taxes on investments. You also cannot deduct taxes you paid in other countries, even if you claim a foreign tax credit elsewhere on your return.

Who benefits most from the SALT deduction

The SALT deduction is most useful for high-income earners and homeowners in high-tax states. If you live in a state with no income tax — like Texas, Florida, or Nevada — you have no state income tax to deduct, so you would only count property tax and sales tax. If you live in a state with high income tax and high property values, like California, New York, Massachusetts, or New Jersey, you are more likely to hit the $10,000 cap and benefit from itemizing.

Renters typically see less benefit because they do not pay property tax directly. If you rent and live in a state with income tax, you could still deduct your state income tax up to the $10,000 cap, but you would need other deductions (like charitable donations or mortgage interest on a second property) to make itemizing worthwhile.

People with lower incomes rarely benefit from the SALT deduction because their total deductions usually fall below the standard deduction. For example, if you earn $35,000 a year and paid $3,000 in state income tax and property tax combined, itemizing would give you a $3,000 deduction — but the standard deduction for a single filer is $14,600, so you would use the standard deduction instead.

The $10,000 cap and what happens after 2025

The $10,000 annual cap means that even if you paid $15,000 in state income tax and $8,000 in property tax ($23,000 total), you can only deduct $10,000. The remaining $13,000 is lost — you cannot carry it forward to future years or deduct it any other way.

This cap was set by the Tax Cuts and Jobs Act of 2017 and is scheduled to expire on December 31, 2025. If Congress does not extend it, the cap will drop to $5,000 per year (or $2,500 if you are married filing separately) starting in 2026. Whether the cap is extended, made permanent, or allowed to expire depends on future congressional votes and is not yet decided.

How to claim the SALT deduction

To claim the SALT deduction, you must itemize deductions on Schedule A of your federal tax return (Form 1040). You will need documentation of what you paid: your state tax return or a tax transcript showing state income tax withheld, your property tax bill or assessment notice, and receipts or credit card statements showing sales tax paid (if you choose to deduct sales tax instead of income tax).

When you file, you enter your SALT amount on Schedule A, line 5a. If your combined SALT exceeds $10,000, you enter only $10,000. You then add up all your itemized deductions and compare that total to the standard deduction for your filing status. If your itemized total is higher, you use Schedule A; if the standard deduction is higher, you use that instead and get no benefit from SALT.

Most tax software walks you through this calculation automatically. If you use a tax preparer, bring documentation of your state and local taxes paid so they can verify the amount and ensure you do not exceed the $10,000 cap.

Frequently Asked Questions

Can I deduct both state income tax and sales tax?

No. You choose one or the other, not both. Most people deduct state income tax because it is usually larger. You would only deduct sales tax instead if you live in a state with no income tax or very low income tax, and your sales tax paid is higher than your income tax.

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

You deduct the state and local taxes you actually paid to each state. If you lived in New York for six months and Florida for six months, you would deduct only the New York state income tax and property tax you paid during those six months, plus any Florida property tax. Your total still cannot exceed $10,000.

Does the SALT deduction apply to federal taxes I paid?

No. Federal income tax, payroll taxes, and federal excise taxes do not count. The SALT deduction covers only state and local taxes — income tax, property tax, and sales tax paid to your state, county, or city.

What happens to my SALT deduction after 2025?

The $10,000 cap is set to expire on December 31, 2025. Starting in 2026, the cap would drop to $5,000 per year unless Congress votes to extend or change the current law. This is not yet decided and may change depending on future legislation.

Should I itemize or take the standard deduction?

Compare your total itemized deductions (SALT plus mortgage interest, charitable donations, medical expenses, and other deductible items) to the standard deduction for your filing status. If itemized deductions are higher, itemize. If the standard deduction is higher, use that. Most people benefit from the standard deduction.