State and Local Tax Deduction (SALT)

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)

⏪ 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)

🧮 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)