Tax season is just around the corner, and many Americans are wondering how they can maximize their deductions. One of the most important tax breaks to be aware of is the State and Local Tax (SALT) deduction, which allows taxpayers to deduct up to $10,000 in state and local taxes on their federal tax return. But who qualifies, and how can you claim it?
Let’s break it down.
What Is the SALT Deduction?
The SALT deduction lets taxpayers lower their taxable income by deducting the state and local taxes they paid throughout the year. This includes:
Property Taxes – If you own a home or land, you can deduct your property tax payments.
State and Local Income Taxes – These are the taxes withheld from your paycheck or paid through estimated tax payments.
Sales Taxes – If you live in a state with no income tax, you can deduct sales taxes instead.
However, the total deduction is capped at $10,000 ($5,000 if married and filing separately).
Who Qualifies for the SALT Deduction?
Not everyone can claim this tax break. To qualify, you must:
✔️ Itemize Deductions – If you take the standard deduction, you cannot claim the SALT deduction. You must choose to itemize instead.
✔️ Stay Within the $10,000 Limit – Even if your state and local taxes exceed $10,000, that’s the maximum amount you can deduct.
✔️ Have Eligible Taxes – Only property taxes, income taxes, or sales taxes can be deducted. Other taxes, like federal income tax, don’t count.
How to Claim the SALT Deduction on Your 2025 Taxes
If you qualify, claiming the SALT deduction is easy. Here’s how:
1️⃣ Collect Your Tax Documents – Gather records of property tax payments, state/local income tax returns, and major purchases if claiming sales tax.
2️⃣ Choose Between State Income Tax and Sales Tax – You can’t deduct both. Use the IRS Sales Tax Deduction Calculator to decide which benefits you more.
3️⃣ Fill Out Schedule A (Form 1040) – List your state and local taxes and make sure they don’t exceed the $10,000 cap.
4️⃣ File Your Taxes – Whether filing manually or using tax software, make sure to itemize your deductions correctly.
What Happens to the SALT Deduction in 2026?
Right now, the $10,000 cap is set to expire after December 31, 2025 unless Congress takes action. If the cap is removed, taxpayers could once again deduct all their state and local taxes.
Some lawmakers want to increase the cap to $15,000 for single filers and $30,000 for married couples, while others are pushing for a complete repeal of the limit. Keep an eye on Congress for updates that could impact your future tax bills.
Which States Are Most Affected?
The $10,000 cap hits hardest in high-tax states, where residents often pay more than that in property and state income taxes alone. If you live in one of these states, the cap might limit how much you can deduct:
California
New York
New Jersey
Connecticut
Illinois
For taxpayers in these states, every dollar counts, so maximizing your deductions is key.
Final Thoughts
The SALT deduction is one of the most valuable tax breaks for homeowners and residents of high-tax states. But with the $10,000 cap in place, not everyone can take full advantage of it.
If you’re eligible, make sure to itemize your deductions, choose between income and sales tax, and file correctly to get the biggest possible tax break. And stay tuned—Congress might change the rules in 2026!
