The State and Local Tax (SALT) deduction allows taxpayers who itemize to deduct certain state and local taxes on Schedule A (Form 1040).
Beginning in tax year 2025, major changes increase the SALT deduction maximum under the One Big Beautiful Bill Act. The SALT cap increases to $40,000 beginning in 2025 (and increases 1% each year through 2029) before reverting to $10,000 in 2030.
The cap for Married Filing Separately (MFS) is $20,000 in 2025 (also rising 1% annually until 2029).
🏷️ What State and Local Taxes Are Deductible?
🧮 1. State & Local Income Taxes
Deductible amounts include:
- State and local income tax withheld
- Estimated tax payments
- Prior‑year state/local taxes paid in the current year
- Mandatory contributions to state disability, unemployment, or family leave programs (e.g., CA PFL, NJ FLI) – these count as state income taxes.
🧾 2. State & Local General Sales Taxes
You may choose to deduct sales tax instead of income tax.
You can claim:
- Actual receipts OR
- IRS Sales Tax Calculator amounts (if applicable)
⚠ You may deduct either income tax OR sales tax, not both.
🏡 3. Real Estate Property Taxes
You may deduct:
- Home property taxes
- Taxes on land or other real estate you own
🚗 4. Personal Property Taxes
Must be value‑based taxes, such as:
- Vehicle registration taxes
- Boat or RV value‑based taxes
⛔ What Taxes Are NOT Deductible?
- Federal income taxes
- Social Security or Medicare taxes
- Flat non‑value‑based fees
- Penalties or interest on late tax payments
- Foreign income taxes (handled separately via credit/deduction rules)
📌 What Is the SALT Deduction Limit?
Before 2025
- The Tax Cuts and Jobs Act (TCJA) set a $10,000 cap on SALT deductions
($5,000 if Married Filing Separately).
Starting in 2025
- The One Big Beautiful Bill Act increases the SALT cap to $40,000.
- The cap will rise by 1% per year through 2029.
🧮 How Is the SALT Deduction Calculated?
If your state and local taxes are at or below the cap:
- Claim the full amount as an itemized deduction.
If your state and local taxes exceed the cap:
- Use the Schedule A SALT worksheet to calculate your allowable deduction.
- Good news: The program will automatically complete this calculation based on your entries.
📍 Where Do I Enter SALT in TaxSlayer?
- Federal Section
- Deductions Select My Forms
- Itemized Deductions
- Taxes You Paid
- Choose:
- Additional real estate taxes for non-business property - real estate taxes not paid on your 1098 mortgage statement.
- Personal property taxes - vehicle or boat fees (subject to limitations)
- Additional state and local income tax paid - Amounts paid during the current year not included on the return ( no federal)
- Prior-year 4th quarter states estimates paid after Dec. 31, 2024
- Sales Tax Deduction - You can claim income or sales tax but not both
- Other Taxes - other taxes you paid that don't fit into any other categories.
⚖️ 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
- Taxpayers in high‑tax states—such as
California, New York, New Jersey, Illinois, and Connecticut may feel the most impact from SALT limitations. - Many states may introduce new credits or deductions to offset federal SALT caps for their residents.
For more information, please see Topic No. 503.