SALT stands for state and local taxes. The SALT deduction allows taxpayers to reduce their federal taxable income by deducting taxes paid to state and local governments.
How is the SALT Deduction claimed?
A taxpayer can calculate their SALT deduction simply, by adding their state and local taxes. Taxpayers who seek to claim the SALT deduction should itemize deductions on their tax return. Taxes that can potentially be included in the SALT deduction include state and local income tax, sales tax, property tax, and personal property tax. However, which of these taxes a given taxpayer can include is dependent upon numerous factors.
One of the primary factors is where the taxpayer lives. If the taxpayer lives in a state that imposes state and local taxes, they can choose between including state and local taxes or sales tax. Some taxpayers, specifically those who’ve made significant purchases in the previous tax year, may elect to include sales tax instead of their state and local taxes. Likewise, taxpayers who live in a state that does not impose state and local taxes may choose to deduct sales tax instead. Additionally, some states tax personal property. If a taxpayer lives in a state in which their personal property is being taxed, they can include that in their SALT deduction calculation.
What is the Deduction Cap?
In 2025, the SALT deduction cap was $40,000 for both single and joint filers, and $20,000 for those who are married but filing separately. In the past, this limit was $10,000. For the next three years, from 2026 through 2029, the SALT deduction cap will increase by 1% each year. After 2029, the SALT deduction cap will return to $10,000 for single and joint filers and $5,000 for those married filing separately.
Why it the SALT Deduction Important?
The SALT deduction is important because it can be the deciding factor in whether a taxpayer chooses to itemize deductions on their tax return or choose the standard deduction. For this reason and those listed above, it is very important that taxpayers work with tax planning professionals to develop their SALT deduction strategy.
Sources:
(1) https://www.fidelity.com/learning-center/personal-finance/what-is-the-salt-deduction
(2) https://legalclarity.org/how-many-states-have-personal-property-tax/