The State and Local Tax (SALT) deduction allows taxpayers who itemize deductions to deduct certain state and local taxes paid during the tax year on Schedule A (Form 1040).
For many homeowners and taxpayers living in states with higher taxes, the SALT deduction can be a significant part of their itemized deductions. However, federal law limits the amount that can be claimed, and not all taxes qualify.
What Taxes Qualify for the SALT Deduction?
The SALT deduction generally includes four categories of state and local taxes.
State and Local Income Taxes
You may deduct state and local income taxes paid during the year, including:
- State and local income tax withheld from your wages
- Estimated state income tax payments
- Prior-year state or local income taxes paid during the current tax year
- Certain mandatory payroll contributions that are treated as state income taxes under federal law, such as some state disability, family leave, or unemployment programs
State and Local General Sales Taxes
Instead of deducting state and local income taxes, you may choose to deduct state and local sales taxes.
You can calculate the deduction using:
- Your actual sales tax receipts, or
- The IRS Sales Tax Tables and Sales Tax Deduction Calculator
You must choose either state and local income taxes or state and local sales taxes. You can't deduct both.
This option can be especially beneficial for taxpayers who live in states with little or no state income tax or those who made large taxable purchases during the year.
Real Estate Taxes
You may deduct qualifying real estate taxes paid on:
- Your primary residence
- A second home
- Land or other nonbusiness real property
The tax must be assessed uniformly based on the property's value and imposed for the general public welfare.
Personal Property Taxes
Personal property taxes may qualify if they are:
- Based on the value of the property, and
- Charged on a recurring basis
Examples include:
- Value-based vehicle registration taxes
- Value-based taxes on boats
- Value-based taxes on recreational vehicles
Flat registration fees, plate fees, and weight-based fees generally do not qualify.
What Taxes Aren't Deductible?
The following taxes generally can't be claimed as part of the SALT deduction:
- Federal income taxes
- Social Security taxes
- Medicare taxes
- Flat fees not based on property value
- Penalties and interest on unpaid taxes
- Most fines and assessments
- Foreign income taxes claimed under separate tax credit or deduction rules
What Is the SALT Deduction Limit?
Federal law limits the total amount of state and local taxes that can be deducted on Schedule A.
Tax Years Before 2025
Under the Tax Cuts and Jobs Act (TCJA), the SALT deduction was limited to:
- $10,000 for most filing statuses
- $5,000 for Married Filing Separately
Tax Years 2025 Through 2029
Current federal law increased the limitation beginning with the 2025 tax year.
For tax year 2026, most taxpayers can deduct up to $40,400. Married Filing Separate taxpayers can deduct up to $20,200. The software automatically applies the correct limitation and any required income-based adjustments when calculating your deduction.
If your total state and local taxes exceed the allowable limit, your deduction may be reduced automatically.
How Is the SALT Deduction Calculated?
The SALT deduction is determined by adding together your eligible:
- State and local income taxes or sales taxes
- Real estate taxes
- Personal property taxes
The total is then compared to the federal SALT limitation.
If your total taxes are below the limit, the full amount is generally deductible.
If your taxes exceed the limit, only the allowable amount can be claimed.
Fortunately, you don't need to calculate the limitation manually. The software automatically completes all applicable SALT worksheets and determines your allowable deduction.
Where Do I Enter State and Local Taxes in the Software?
To enter SALT-related information, navigate to:
- Federal
- Deductions
- Select my forms
- Itemized Deductions
- Taxes You Paid
From there, you can enter:
- Additional real estate taxes not reported on Form 1098
- Personal property taxes, such as qualifying vehicle taxes
- Additional state and local income taxes paid
- Prior-year state estimated tax payments paid during the current year
- Sales tax deduction information
- Other qualifying taxes
Do I Need to Itemize to Claim the SALT Deduction?
Yes.
The SALT deduction is available only if you itemize deductions on Schedule A. If your total itemized deductions don't exceed your standard deduction, the standard deduction will usually provide a greater tax benefit.
The software automatically compares both methods and selects the option that results in the lowest tax liability.
State Returns May Follow Different Rules
Some states don't follow federal SALT deduction rules exactly. As a result:
- Your state itemized deductions may differ from your federal deductions.
- Some states allow deductions or adjustments that aren't available federally.
- State tax law changes may affect how deductions are calculated in future years.
Always review your state return carefully and ensure all state-specific entries are complete. Many states may introduce new credits or deductions to offset federal SALT caps for their residents. Be sure to review your state information.
Disclaimer – SALT State Conformity
State return treatment of the SALT deduction may differ from federal law. If your state later changes or updates its conformity after you file, your return may need to be amended. Tax software will be updated to reflect law changes, but updates may take time and may not be applied to returns already filed. Always review current state guidance to determine if corrective action is needed
Additional Information
For more information, please see Topic No. 503.