What is the State and Local Tax Deduction?
The state and local tax deduction (SALT deduction) allows certain taxes paid to state and local governments to be itemized deductions on their federal income tax return.
From 2019 through 2024, the State and Local Tax (SALT) deduction was capped at $10,000 ($5,000 for taxpayers filing as Married Filing Separately).
For tax years 2025 through 2029, the SALT deduction limit increases to $40,000 for taxpayers with adjusted gross income (AGI) of $500,000 or less. Once AGI exceeds $500,000, the deduction limit begins to phase out until it is reduced back to $10,000.
For taxpayers filing as Married Filing Separately, the SALT deduction limit increases to $20,000 for those with AGI of $250,000 or less. Once AGI exceeds $250,000, the deduction limit phases out until it is reduced back to $5,000.
Beginning after 2025, both the deduction limits and AGI thresholds will increase annually by 1% through 2029.
How Does SALT Tax Deduction Work?
Individuals with adjusted gross income (AGI) of up to $500,000 ($250,000 for taxpayers filing as Married Filing Separately) who itemize deductions on their federal income tax return may deduct up to $40,000 ($20,000 if Married Filing Separately) in combined state and local property taxes and sales or income taxes paid during the tax year.
For taxpayers whose AGI exceeds $500,000 ($250,000 if Married Filing Separately), the SALT deduction limit begins to phase out until it is reduced to $10,000 ($5,000 if Married Filing Separately).
Beginning after 2025, both the deduction limits and the AGI phase-out thresholds will increase annually by 1%.
Deductible taxes include state, local, and foreign tax on income and property taxes. Individuals can also choose to deduct their sales taxes in place of their state income tax.
If the taxpayer takes the standard deduction on their federal income tax return, they are not allowed to take a deduction for their state and local taxes.
For more information see the following on the IRS website:
- Schedule A instructions for line 5
- IRS Publication 17, Part III, Section 11 – Taxes
- IRS Topic No. 503 – Deductible Taxes
How to Claim SALT Deduction
If an individual itemizes deductions on their federal income tax return, they will report their total state and local taxes on Schedule A, lines 5a through 5c. If the total amount of state and local taxes paid exceeds $40,000 ($20,000 for taxpayers filing as Married Filing Separately), the SALT deduction on Schedule A will be limited to $40,000 ($20,000 if Married Filing Separately).
For taxpayers whose adjusted gross income (AGI) exceeds $500,000 ($250,000 if Married Filing Separately), the SALT deduction limit begins to phase out until it is reduced to $10,000 ($5,000 if Married Filing Separately).
A taxpayer may benefit from itemizing deductions only if their total itemized deductions on Schedule A exceed their standard deduction. The standard deduction amount is determined by filing status and is adjusted annually for inflation.
For tax year 2025, the standard deduction amounts are:
- $15,750 — Single or Married Filing Separately
- $31,500 — Married Filing Jointly or Qualifying Surviving Spouse
- $23,625 — Head of Household
