What is SALT tax and the SALT tax deduction?

Key takeaways:

• The SALT deduction allows taxpayers to write off a portion of state and local taxes on their Federal return.
• You can deduct state and local income tax from your paycheck if you’re a W-2 employee or your estimated tax payments if you’re self-employed.
• You can deduct state and local sales tax if you’ve kept track of your receipts, or use the IRS Sales Tax Deduction Calculator to estimate your deduction.
• Property taxes on personal property like homes, vehicles, or boats may also be eligible for the SALT deduction.
• To claim the SALT deduction, you must itemize deductions instead of taking the standard deduction.
• The SALT deduction is capped at $10,000, a limit introduced by the Tax Cuts and Jobs Act in 2017.
• The SALT deduction cap will expire after 2025 unless Congress chooses to extend it.
• Taxpayers who itemize and whose SALT deduction and other write-offs exceed the standard deduction can benefit from the SALT tax deduction.

What is the SALT deduction?

SALT stands for state and local taxes, and the SALT deduction is a tax deduction that allows taxpayers to deduct all or a portion of their state or local tax from their Federal taxable income.

Taxes you can write-off with the SALT deduction

State and local income tax

Are you a W-2 employee? You can deduct the state and local income tax withheld from your paycheck throughout the year. To find out how much you’ve paid for the year, just look at your last paycheck or W-2.

Are you self-employed or a freelancer? You can deduct the estimated state and any local tax payments you’ve made throughout the year.

Have you made payments on state or local taxes you owe from previous years? The SALT deduction allows you to write off those payments, too.

Sales tax

You can also write off sales tax. One way to claim this deduction is by keeping track of how much you’ve actually spent on sales tax and saving receipts. Alternatively, you can use the IRS’s handy Sales Tax Deduction Calculator to estimate your state and local sales tax for the year.

Property tax

If you pay annual tax on your personal property, like a vehicle, boat, or home, you may be able to write off a portion of your property tax with the SALT deduction.   

Keep in mind that with the SALT deduction, you can write off either your state and local income tax or state and local sales tax, not both. You’ll have to choose one or the other. 

Who can take the SALT deduction?

Any taxpayer who pays state and local income, property, or sales tax and also chooses to itemize their deductions can take the SALT deduction.

You cannot take advantage of the SALT deduction if you are taking the standard deduction. For 2024, the standard deduction is $14,600 for single filers and married couples filing separately, and $29,200 for married couples filing jointly.

To determine whether to itemize or take the standard deduction, add up your maximum SALT deduction and your other itemized deductions, and compare the total to the standard deduction for 2024. Take the option that gives you the largest tax deduction.

What is the SALT deduction cap?

The SALT deduction cap limits the amount of state and local tax a taxpayer can write off to $10,000 for single filers and married couples filing jointly, and to $5,000 for married couples filing separately.

When the SALT deduction was written into law all the way back in 1913, there was no limit to how much state and local tax a taxpayer could write off. In 2017, the Tax Cuts and Jobs Act capped the SALT deduction at $10,000.

SALT tax deduction 2025: Will SALT expire in 2025?

No, the SALT deduction will not expire in 2025; however, the SALT deduction cap does expire after 2025, along with many other provisions in the Tax Cuts and Jobs Act.

The fate of the SALT deduction cap is still up in the air. Congress may choose to extend the SALT cap in future years, or it may let the SALT cap expire after 2025. Only time will tell.

Who benefits from the SALT tax deduction? 

The SALT deduction benefits any taxpayer who itemizes deductions, and whose total SALT deduction and other itemized deductions exceeds the standard deduction. For example, if you’re single, and you take the full $10,000 SALT deduction, plus you have $5,800 in other deductions, your itemized deductions exceed the $14,600 standard deduction. In this example, you benefit from the SALT deduction.

If the SALT deduction cap is lifted, the SALT deduction will become an even larger benefit for taxpayers who pay higher state and local taxes. The more state and local taxes you pay, the more you would benefit from an unlimited SALT deduction.

What is an example of a SALT deduction?

Let’s say you're a single taxpayer living in a state with high income and property taxes. You paid $8,000 in state income tax throughout the year, plus $4,000 in property taxes on your home. Under the SALT deduction cap, you can only write off a total of $10,000 on your Federal taxes, even though you paid $12,000 in state and local taxes. You could use the full $10,000 deduction to reduce your taxable income when you file your Federal tax return, helping to lower your tax.

However, keep in mind that if your itemized deductions, including the SALT deduction, don’t add up to more than the standard deduction, it’s better to take the standard deduction instead.

Have questions or concerns about the SALT deduction? Need help determining whether you’ll benefit more from taking the standard deduction or itemizing your deductions? It’s never too early for tax planning, especially if you want to make sure you get every credit and deduction you deserve. Luckily, Jackson Hewitt is open all year! Book your appointment today.  

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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