Tax Guide • Homeowners & Buyers

Understanding the SALT Deduction (State & Local Taxes)

The SALT deduction lets itemizing taxpayers deduct certain state and local taxes on Schedule A (Form 1040) — typically property tax plus either state & local income or sales tax. Since 2018, a federal cap limits most households’ total SALT deduction.

What’s new The federal SALT cap continues to apply through 2025 unless Congress changes the law. Some state-level rules and workarounds exist, but most individual filers remain subject to the federal cap.

2025 SALT Expansion Update

Beginning with the 2025 tax year, you can claim up to $40,000 in SALT deductions, quadruple the $10,000 maximum in effect from 2018 through 2024. The deduction increases slightly each year through 2029, then reverts to $10,000 unless Congress acts to preserve the increase. There’s a phasedown for those with modified adjusted gross income over $500,000. The new law also preserves mortgage interest deductibility at the level set in the Tax Cuts and Jobs Act (TCJA) of 2017.

How the SALT Deduction Works (Quick Overview)

  • What counts: State & local real estate (property) taxes, plus either state & local income taxes or state & local general sales taxes (choose one category).
  • Who can claim: Taxpayers who itemize deductions on Schedule A (Form 1040). If you take the standard deduction, you don’t claim SALT separately.
  • Federal cap: The total SALT deduction is generally capped at $10,000 per return ($5,000 if married filing separately) for tax years currently in effect under the TCJA framework.
  • What’s not included: Fees that aren’t taxes (e.g., HOA dues), water/sewer usage charges, or taxes unrelated to income/sales or real estate for personal Schedule A purposes.

This page is a general consumer guide and not tax advice. Always confirm with your CPA or tax preparer.

What’s Typically Deductible vs. Not (Schedule A – Personal)

Category Deductible? Notes
Real estate (property) tax on your home Yes (counts toward cap) Ad valorem property taxes assessed by state/local governments.
State & local income tax Yes (choose income or sales) W-2 withholding & estimated payments; subject to the cap.
State & local general sales tax Yes (choose sales or income) Either use IRS tables + large purchase add-ons or actual receipts; subject to the cap.
Personal property tax (e.g., vehicle ad valorem in some states) Possibly Must be based on value and charged annually; subject to the cap.
HOA dues, condo fees, municipal utility charges No Not taxes; not deductible on Schedule A as SALT.

Business-related state/local taxes may be deductible on business schedules (e.g., Schedule C/E) and aren’t subject to the personal SALT cap—ask your tax professional.

Current Cap & Timeline

  • Cap level: Total SALT deduction generally capped at $10,000 per return (or $5,000 if married filing separately).
  • Period: The cap applies under current federal law for tax years in effect through 2025 unless Congress acts to modify/extend it.
  • Impact: Households in higher-tax states (property and/or income) are most likely to hit the cap.
  • State workarounds: Some states have pass-through entity (PTE) taxes to help certain business owners deduct more at the entity level; this is separate from personal Schedule A.

Frequently Asked Questions

Do I have to choose between state income and sales tax?

Yes. For Schedule A, you choose to deduct either state & local income tax or state & local general sales tax — not both. Property tax can be added in either case (all subject to the cap).

What if I take the standard deduction?

Then you don’t claim SALT separately. SALT is an itemized deduction on Schedule A; you use whichever approach (standard vs. itemized) yields the lower tax.

Is the cap per person or per return?

Per return. Generally $10,000 total per tax return, or $5,000 if married filing separately.

Will the cap change after 2025?

Under current law, provisions are scheduled to change after 2025 unless Congress extends or revises them. Monitor IRS/NAR updates and consult your tax professional.

INFORMATION DEEMED RELIABLE BUT NOT GUARANTEED

Sources: NAR — Consumer Guide: SALT Deductions · Thomson Reuters — SALT Deduction Definition