The SALT deduction allows taxpayers who itemize deductions to deduct certain state and local taxes paid during the year from their federal taxable income.
Taxes That Qualify
Eligible state and local taxes include:
- State and local income taxes
- State and local real property taxes (real estate)
- State and local personal property taxes (vehicles, boats, etc.)
- State and local sales taxes
- Can be elected instead of income taxes (not both)
2025 SALT Deduction Limits (Post‑OBBBA)
| Filing Status | Maximum SALT Deduction |
|---|---|
| Single / Head of Household | Up to $40,000 |
| Married Filing Jointly (MFJ) | Up to $40,000 |
| Married Filing Separately (MFS) | Up to $20,000 |
Prior Law (Before 2025)
Under the Tax Cuts and Jobs Act (TCJA):
- SALT deduction was capped at:
- $10,000 for most filers
- $5,000 for MFS
OBBBA Update Summary
- SALT cap increased to $40,000 starting in 2025
- Cap increases by 1% annually through 2029
- In 2030, the cap reverts to $10,000 ($5,000 for MFS)
Income‑Based Phaseout Rules
The enhanced SALT deduction phases out for higher‑income taxpayers.
Phaseout Thresholds (MAGI)
| Filing Status | Phaseout Begins At |
|---|---|
| Single / MFJ | $500,000 MAGI |
| MFS | $250,000 MAGI |
Phaseout Formula
- Deduction is reduced by 30% of MAGI above the threshold
- A minimum SALT deduction always applies:
- $10,000 ($5,000 for MFS), even for high earners
Example
Married Filing Jointly with $600,000 MAGI
- Excess MAGI:
- $600,000 − $500,000 = $100,000
- Reduction:
- 30% × $100,000 = $30,000
- Final SALT cap:
- $40,000 − $30,000 = $10,000
Eligibility & Requirements
To claim the SALT deduction, the taxpayer must:
- Itemize deductions on Schedule A (Form 1040)
- Have paid or accrued the taxes during the tax year
Taxes That Do Not Qualify
The following cannot be deducted as SALT:
- Federal income taxes
- Taxes related to business or rental property
- (Deducted elsewhere on the return)
- Local benefit assessments
- (Unless specifically for maintenance or interest)