What the SALT deduction is

The SALT deduction lets you subtract state and local taxes you paid from your federal taxable income. SALT stands for state, local, and territorial taxes. On your federal return, you can deduct the taxes you paid to your state, city, or county — but only if you itemize deductions instead of taking the standard deduction.

The catch: there is a cap. You can deduct a maximum of $10,000 per year in SALT taxes, no matter how much you actually paid. This limit applies whether you file single, married filing jointly, or any other status. The $10,000 cap has been in place since 2018 and is set to expire after 2025 unless Congress extends it.

SALT taxes include income tax, property tax, and sales tax — but you choose which ones to count. You cannot deduct all three in the same year. Most people deduct either state income tax or sales tax (whichever is larger), plus property tax up to the $10,000 total.

Key Takeaways

  • You can only use the SALT deduction if you itemize deductions on Schedule A; the standard deduction and SALT deduction are mutually exclusive.
  • The maximum SALT deduction is $10,000 per year, combining state income tax, sales tax, and property tax.
  • You choose whether to deduct state income tax or sales tax, but not both in the same year.
  • Property tax is deductible separately and counts toward your $10,000 cap.
  • The $10,000 cap expires after 2025 unless Congress votes to extend it.

When you should itemize to use SALT

Itemizing only makes sense if your total deductions exceed the standard deduction for your filing status. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your SALT taxes plus mortgage interest, charitable donations, and other itemizable expenses add up to more than that, itemizing saves you money.

Example: You are married filing jointly, paid $8,000 in state income tax, $6,000 in property tax, and gave $3,000 to charity. Your SALT deduction is capped at $10,000 (the $8,000 income tax plus $2,000 of the $6,000 property tax). Add the $3,000 charity deduction and your total itemized deductions are $13,000. Since $13,000 is less than the $29,200 standard deduction, you would take the standard deduction instead and get no benefit from SALT.

If the same person had $8,000 in state income tax, $8,000 in property tax, and $8,000 in charitable donations, their itemized deductions would be $24,000 ($10,000 SALT cap plus $8,000 charity, with $6,000 of property tax unused). That exceeds $29,200, so they still would not itemize — but if they had $15,000 in charity donations instead, itemizing would save them money.

State income tax versus sales tax

You deduct either state income tax or sales tax, whichever is larger. You cannot deduct both. Most people in high-income-tax states (California, New York, Massachusetts, Illinois) deduct income tax. People in states with no income tax but high sales tax (Texas, Florida, Tennessee, Washington) deduct sales tax instead.

If you paid state income tax, use that number. The IRS provides a sales tax table for people who deduct sales tax instead, but you can also calculate your actual sales tax paid if you kept receipts. Few people track every purchase, so most use the IRS table, which estimates based on your income and state.

You report your choice on Schedule A, line 5a (state and local income tax) or line 5b (sales tax). You fill in one or the other, not both. If you are unsure which is larger, calculate both and use the bigger number.

Property tax and the $10,000 cap

Property tax is deductible on line 5c of Schedule A, and it counts toward your $10,000 SALT cap. This means if you paid $8,000 in state income tax and $5,000 in property tax, you can deduct only $10,000 total — the full $8,000 income tax plus $2,000 of the property tax. The remaining $3,000 in property tax is lost.

Property tax includes real estate tax on your home or rental property. It does not include homeowners insurance, HOA fees, or mortgage interest (mortgage interest is deductible separately on Schedule A if you itemize). If you own multiple properties, add up all property taxes paid and explore them against the $10,000 cap.

If you live in a state with no income tax and low property tax, you may have room under the $10,000 cap to deduct sales tax as well. For example, if you paid $3,000 in property tax and live in a no-income-tax state, you could deduct $3,000 property tax plus up to $7,000 in sales tax, for a total of $10,000.

How to report SALT on your return

SALT deductions go on Schedule A (Form 1040), which is the itemized deduction form. You complete Schedule A only if you are itemizing. Lines 5a, 5b, and 5c are where SALT taxes go: line 5a for state income tax, line 5b for sales tax (if you choose that instead), and line 5c for property tax.

Add lines 5a (or 5b) and 5c. If the total exceeds $10,000, write $10,000 on line 5d. If the total is $10,000 or less, write the actual amount. This number flows to your total itemized deductions, which you compare against the standard deduction to decide whether to itemize.

Keep receipts, property tax bills, and state tax return copies to support your SALT deduction. The IRS does not always ask for proof, but if you are audited, you will need to show what you paid. For sales tax, the IRS table is acceptable, but your actual receipts are stronger evidence if you have them.

Who benefits most from SALT

High-income earners in high-tax states benefit most. If you live in California, New York, New Jersey, or Illinois and earn over $100,000, you likely pay enough in state income tax and property tax to exceed the standard deduction when combined with other itemizable expenses. The $10,000 cap hurts you most if you live in an expensive area with high property taxes and high state income tax.

People in low-tax states or with low incomes rarely benefit. If you live in Texas, Florida, or Tennessee (no state income tax) and own a modest home, your property tax alone may not reach $10,000, leaving no room for sales tax. And if your total itemized deductions do not exceed the standard deduction, you get no benefit from SALT at all.

Renters who do not own property have a harder time using SALT. Renters pay sales tax but not property tax. If you rent and live in a high-income-tax state, you can deduct state income tax. But if you rent and live in a no-income-tax state, you have only sales tax to deduct, which is often small enough that itemizing does not pay off.

What happens after 2025

The $10,000 SALT cap is scheduled to expire on December 31, 2025. After that date, unless Congress extends it, the cap disappears and you could deduct all your SALT taxes with no limit. This is uncertain — Congress has extended the cap before, and it may do so again. Do not plan your 2026 taxes assuming the cap is gone.

If the cap does expire, high-income earners in high-tax states will see a significant tax cut. Someone in New York or California who pays $20,000 in state income tax and $15,000 in property tax could deduct all $35,000 instead of just $10,000. For now, assume the $10,000 cap applies to your 2024 and 2025 returns.

Frequently Asked Questions

Can I deduct both state income tax and sales tax?

No. You choose one or the other. Calculate both, then deduct whichever is larger. You cannot deduct both in the same year, even if you paid both. Property tax is separate and counts toward the same $10,000 cap.

What if I moved during the year and paid taxes to two states?

Add up all state income tax you paid to all states during the year and use that total (up to the $10,000 cap). The same applies to property tax — if you owned homes in two states, add both property tax bills. Sales tax is trickier; use the IRS table for your state of residence on December 31.

Does the SALT deduction explore to federal income tax I paid?

No. SALT covers only state, local, and territorial taxes. Federal income tax, Social Security tax, and Medicare tax are not deductible. Only taxes paid to your state, city, or county count.

If I do not itemize, can I still deduct SALT?

No. The SALT deduction exists only on Schedule A, which is the itemized deduction form. If you take the standard deduction, you cannot use SALT. You must choose one or the other.

How do I know if I should itemize?

Add up all your itemizable deductions: SALT (capped at $10,000), mortgage interest, charitable donations, and medical expenses over 7.5% of your income. If the total exceeds the standard deduction for your filing status, itemize. If not, take the standard deduction.