�♓� What Is the State and Local Tax (SALT) Deduction?

The state and local tax (SALT) deduction is an itemized deduction taxpayers can use when they file their annual tax returns. The SA𒆙LT deduction can provide a little tax relief to individuals who don't mind doing 🃏some extra work when they prepare their returns.

Taxpayers who use the SALT deduction cannot claim the standard deduction. The SALT de✨duction has been the subject of some debate but the rules for claiming it remain in pl🧜ace through tax year 2025.

How the State and Local Tax (SALT) Deductiওon Worꦺks

A tax deduction subtracts from your income. You ultimately pay tax on fewer dollars when you claim one. This is in contrast to a tax credit, which is a dollar amount that comes directly off of what you owe the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS).

The SALT deduction allows you to subtract up to $10,000 in property, income, or sales taxes you paid to state and local governments during the tax year. The cap drops to $5,000 if you're married and you file a separate return.

澳洲幸运5官方开奖结果体彩网:Property taxes include those paid on both real and 澳洲幸运5官方开奖结果体彩网:personal property. You can't claim both the sales taxes you paid and the income taxes you paid. You must select one or the other. Income taxes aren't limited to those that came due during the current tax year, however. You can also claim older tax debts if you paid anything toward them during the current year.

History of SALT Deduction

The concept of deducting state and local taxes from income has been part of the federal tax code since 1913. There was initially no dollar limit to the amount of paid taxes you could deduct but that changed when President Donald Trump signed the 澳洲幸运5官方开奖结果体彩网:Tax Cuts and Jobs Act (TCJA) into law late in 2017 during his first term. The SALT deduction remained available under the TCJA, but the act imposed a $10,000 cap on it through the end of its term. The TCJA expires at the end of 2025.

The SALT Cap Debate

The average SALT deduction ranged from about $11,000 to more than $103,000 before the $10,000 TCJA limit existed. The amount depended on how much an individual paid in 澳洲幸运5官方开奖结果体彩网:state and local taxes during the year. Limiting it to $10,000 (or to $5,000 for some taxpayers) wasn't received well when the TCJA went into effect. The change understandably provoked some debate.💙

The Tax Foundation, a nonpartisan tax policy nonprofit, took the position that the SALT deduction provides the most advantage to high-income earners who pay significant amounts of these deductible taxes. The 澳洲幸运5官方开奖结果体彩网:nonprofit issued a 2023 report claiming that these are the only individuals who stand to gain from a 2025 expiration of the cap.

SALT Legislative Moves

The issue made its way to Congress in November 2019. The House of Representatives voted to tweak the SALT limit, increasing it to $20,000 and eliminating it for very high earners through 2023. The Senate didn't cooperate and ultimately rejected the proposal.

Several states rallied on behalf of their citizens when the TCJA cap went into place. The SALT deduction effectively rewarded their residents at the federal level for paying certain taxes at the state and local levels and that reward was now limited. Four states filed a federal lawsuit charging that the $10,000 limit was unconstitutional: Connecticut, Maryland, New Jersey, and New York. The U.S. Supreme Court ultimately ruled otherwise in 2021.  

Congress tried again to retire the $10,000 ceiling in 2021. Senate Majority Leader Chuck Schumer (D-NY) countered with a bill that would have instead eliminated the SALT deduction. Senator Susan Collins (R-ME) responded with legislation that would have increased the limit to $20,000 although only for 澳洲幸运5官方开奖结果体彩网:married tax💎payers who filed ಞjoint returns. All efforts failed.  

Should You Claim the SALT Deduction?

Itemizing your deductions rather than claiming the standard deduction requires completing and submitting 澳洲幸运5官方开奖结果体彩网:Schedule A with your tax return. The schedule tallies up all your tax-deductible expenses for the year. You could end up paying tax on more income than you have to if the total of all your itemized deductions is less than the 澳洲幸运5官方开奖结果体彩网:standard deduction you're entitled to claim for your filing status.

The SALT deduction remains capped at $10,000 as of 2025 but the standard deduction for a single filer is $15,000, increasing to $30,000 for married taxpayers who file jointly. You'll most likely have other itemized deductions you can claim on Schedule A.

The Bottom Line

The TCJA will expire at the close of December 2025 unless Congress decides to extend it. This would result in the removal of the $10,000 cap beginning in 2026. It can be expected that the cap debate will grow more heated as 2025 draws to a close. Trump indicated that he intends to undo the $10,000 cap during his second term. The existing terms and the cap remain in place as you prepare your 2024 and 2025 tax returns.