State and Local Tax Deduction (SALT)

The State and Local Tax Deduction, commonly called the SALT deduction, allows taxpayers who itemize deductions to deduct certain state and local taxes paid during the year from their federal taxable income.

The SALT deduction is claimed on Schedule A (Form 1040) and is available only to taxpayers who itemize deductions. If you claim the standard deduction, you generally cannot claim a separate SALT deduction.

What Taxes Qualify for the SALT Deduction?

The SALT deduction may include:

• State and local income taxes
• State and local real estate (property) taxes
• State and local personal property taxes, such as certain vehicle taxes based on value
• State and local sales taxes

Taxpayers may choose to deduct either:

• State and local income taxes, or
• State and local sales taxes

You cannot deduct both income taxes and sales taxes for the same tax year.

State and Local Income Taxes

Qualifying income taxes may include:

• State income tax withheld from paychecks
• Estimated state income tax payments
• Amounts paid with a state tax return
• Prior-year state tax payments made during the current tax year

These taxes are commonly reported on Forms W-2, state returns, or payment records.

Real Estate Taxes

Property taxes generally qualify if they are:

• Imposed on real property
• Based on the assessed value of the property
• Charged uniformly within the taxing jurisdiction

Examples include taxes paid on:

• Primary residences
• Secondary homes
• Other qualifying personal-use real estate

Personal Property Taxes

Some personal property taxes qualify for the SALT deduction if they are:

• Based on the value of the property
• Assessed annually

Examples may include certain vehicle taxes, boat taxes, or similar value-based taxes imposed by a state or local government.

Sales Tax Deduction

Taxpayers may elect to deduct state and local sales taxes instead of state and local income taxes.

This option can be especially beneficial for taxpayers who:

• Live in states without an income tax
• Made major purchases during the year
• Paid significant sales taxes on vehicles, boats, or other large items

The IRS provides optional sales tax tables that may help calculate the deduction when actual records are unavailable.

SALT Deduction Limits

The SALT deduction is subject to federal limits.

For tax years beginning in 2025, the maximum deduction is generally:

These limits apply to the combined total of qualifying state and local taxes.

Prior SALT Deduction Rules

Before the increase that became effective in 2025, the SALT deduction was generally limited to:

• $10,000 for most taxpayers
• $5,000 for Married Filing Separately taxpayers

Taxpayers filing returns for years before 2025 may see different limitation amounts.

Income-Based Phaseout Rules

The enhanced SALT deduction is subject to income limitations for higher-income taxpayers.

The phaseout generally begins when Modified Adjusted Gross Income (MAGI) exceeds:

As income increases above these thresholds, the allowable SALT deduction may be reduced.

However, a minimum SALT deduction generally remains available even when income exceeds the phaseout thresholds.

Example of a SALT Deduction Limitation

Suppose a Married Filing Jointly taxpayer has:

• MAGI of $600,000
• State and local taxes paid of $40,000

The taxpayer's income exceeds the applicable threshold, which may reduce the amount of SALT deduction allowed under the phaseout rules.

Tax software automatically performs these calculations and applies any required limitations.

How to Claim the SALT Deduction

To claim the SALT deduction, a taxpayer must:

• Itemize deductions on Schedule A (Form 1040)
• Have actually paid the taxes during the tax year (or qualify under applicable accrual rules)
• Maintain records supporting the taxes paid

Common documentation includes:

• Forms W-2
• Property tax bills
• Vehicle tax statements
• State tax payment records
• Closing statements for real estate transactions

Taxes That Do Not Qualify

Certain taxes and assessments cannot be deducted as SALT.

Examples include:

• Federal income taxes
• Federal payroll taxes
• Social Security taxes
• Medicare taxes
• Taxes paid in connection with a trade or business and deducted elsewhere on the return
• Taxes related to rental property that are deducted on rental schedules
• Local assessments for property improvements that increase property value

These items may have different tax treatment but are generally not included in the SALT deduction calculation on Schedule A.

SALT Deduction vs. Business Tax Deductions

The SALT deduction discussed here applies to personal itemized deductions.

Taxes related to:

• Rental properties
• Sole proprietorships
• Partnerships
• S corporations
• Other business activities

are often deductible elsewhere on the return and generally are not subject to the personal SALT limitation.

This distinction can be important for taxpayers who own businesses or rental properties.

Should You Itemize or Take the Standard Deduction?

The SALT deduction only benefits taxpayers who itemize.

Taxpayers generally compare:

• Total itemized deductions, including SALT, mortgage interest, charitable contributions, and other qualifying expenses

to

• The standard deduction

The larger amount usually provides the greater tax benefit.

Most tax software automatically makes this comparison and applies the option that results in the lowest tax liability.