State and Local Tax (SALT): Definition and How It's Deducted

The State and Local Tax (SALT) deduction is a federal itemized tax benefit that allows eligible filers to subtract up to $10,000 in property, income, or sales taxes paid to state and local governments from their taxable income. This deduction offers targeted tax relief for individuals willing to itemize rather than take the standard deduction.

Taxpayers who claim the SALT deduction must forgo the standard deduction, which makes it more beneficial for those with high state and local tax burdens. Although politically debated, the current rules including the $10,000 cap introduced by the Tax Cuts and Jobs Act (TCJA) remain in effect through tax year 2025.

A tax deduction reduces your taxable income, meaning you pay taxes on a smaller portion of your earnings. This differs from a tax credit, which directly lowers the amount you owe to the IRS. The SALT deduction is one such itemized benefit that can shrink your tax bill if you meet eligibility requirements.

The SALT deduction allows you to subtract up to $10,000 in state and local property, income, or sales taxes paid during the tax year. If you're married filing separately, the cap drops to $5,000. This deduction is only available to those who itemize and cannot be combined with the standard deduction.

You can deduct real and personal property taxes, but must choose between sales tax and income tax you can’t claim both. Additionally, income tax deductions aren’t limited to current-year liabilities; if you paid off past tax debts during the year, those payments may also qualify under SALT rules.

The State and Local Tax (SALT) deduction has been part of the U.S. federal tax code since 1913, originally allowing taxpayers to deduct unlimited amounts of state and local taxes from their federal taxable income. This changed in 2017, when the Tax Cuts and Jobs Act (TCJA) signed into law by President Donald Trump capped the deduction at $10,000 through 2025. While the SALT deduction remains available, its future beyond the TCJA expiration date is a subject of ongoing legislative and economic debate.

Before the Tax Cuts and Jobs Act (TCJA) imposed a $10,000 cap, the average State and Local Tax (SALT) deduction ranged from $11,000 to over $100,000, depending on how much a taxpayer paid in property, income, or sales taxes. The cap reduced to $5,000 for married filers submitting separately sparked widespread debate, especially in high-tax states.

Critics argued that the cap disproportionately impacted middle- and upper-income households in regions with elevated tax burdens. The Tax Foundation, a nonpartisan policy group, reported in 2023 that high-income earners are the primary beneficiaries of any potential repeal suggesting that lifting the cap in 2025 would mostly favor those with substantial deductible taxes.

As the TCJA nears expiration, the SALT cap remains a flashpoint in federal tax reform, with lawmakers weighing the tradeoffs between regional fairness, fiscal responsibility, and electoral incentives. The outcome could reshape itemized deductions and influence taxpayer behavior across income brackets.

In November 2019, the House of Representatives voted to raise the SALT deduction cap to $20,000 and eliminate it entirely for high-income earners through 2023. However, the Senate rejected the proposal, halting reform efforts and keeping the $10,000 limit in place.

Several states including Connecticut, Maryland, New Jersey, and New York challenged the cap, arguing it unfairly penalized residents in high-tax regions. These states filed a federal lawsuit claiming the limit was unconstitutional, but the U.S. Supreme Court upheld the cap in 2021, reinforcing the TCJA’s framework.

Congress revisited the issue in 2021, with Senator Chuck Schumer (D-NY) proposing to eliminate the SALT deduction entirely, while Senator Susan Collins (R-ME) introduced a bill to raise the cap to $20,000 for married joint filers. Despite bipartisan interest, all legislative efforts to modify or repeal the cap ultimately failed to pass.

Claiming the State and Local Tax (SALT) deduction requires filing Schedule A and opting for itemized deductions instead of the standard deduction. This form tallies all eligible expenses like property taxes, mortgage interest, and charitable contributions. If your total itemized deductions fall short of the standard deduction for your filing status, you could end up paying tax on more income than necessary.

As of 2025, the SALT deduction remains capped at $10,000, while the standard deduction is $15,000 for single filers and $30,000 for married couples filing jointly. To make itemizing worthwhile, you’ll likely need additional deductions beyond SALT such as medical expenses or home office costs to exceed the standard threshold and reduce your taxable income.

The Tax Cuts and Jobs Act (TCJA) is set to expire at the end of December 2025, which could eliminate the current $10,000 SALT deduction cap starting in 2026 unless Congress votes to extend it. As the deadline approaches, debate over the cap’s future is intensifying. Donald Trump has signaled support for repealing the cap during his second term, adding political momentum to the discussion. For now, the existing rules remain in effect for 2024 and 2025 tax filings, so taxpayers should plan accordingly.