{"id":24117,"date":"2026-04-21T12:05:48","date_gmt":"2026-04-21T12:05:48","guid":{"rendered":"https:\/\/incredipros.com\/?p=24117"},"modified":"2026-04-21T12:05:49","modified_gmt":"2026-04-21T12:05:49","slug":"how-does-the-state-and-local-tax-deduction-work","status":"publish","type":"post","link":"https:\/\/incredipros.com\/?p=24117","title":{"rendered":"How Does the State and Local Tax Deduction Work?"},"content":{"rendered":"
\n

Back in the old days, the state and local tax (SALT) deduction was arguably the most popular tax deduction in America.\n <\/p>\n

\n

Get expert money advice to reach your money goals faster!<\/p>\n<\/p><\/div>\n

You probably remember your parents or grandparents saving every receipt\u2014even on small purchases like a box of nails or a single heirloom tomato\u2014and stuffing them in a manila folder. That\u2019s because, once upon a time, you could deduct an unlimited amount of sales taxes, as well as state income and property taxes, off your federal tax bill.\n <\/p>\n

Thanks to the One Big Beautiful Bill Act (OBBBA), the SALT deduction received a huge boost and could provide a nice cut your tax bill. Let\u2019s find out if the SALT deduction will benefit you, and if it does, how to claim it.\n <\/p>\n

What Is the State and Local Tax Deduction (SALT)?<\/h2>\n

First off, remember that a\u00a0tax deduction\u00a0is basically any expense that can be used to lower your taxable income. For 2025, the\u00a0SALT deduction\u00a0allows you to deduct up to $40,000 total of your state and local property taxes ($20,000 if married filing separately), and either your state and local income taxes or sales taxes.1<\/sup>\n <\/p>\n

However, if your modified adjusted gross income is more than $500,000 ($250,000 if married filing separately), we\u2019ve got some bad news: Your SALT deduction will be reduced, but not less than $10,000 ($5,000 if married filing separately).2<\/sup>\n <\/p>\n

Keep in mind that this boost to the SALT deduction is temporary<\/em>, with the cap set to return to $10,000 starting in 2030.3<\/sup>\n <\/p>\n

\n

The SALT deduction allows you to deduct up to $40,000 of your state and local property taxes, plus either your state and local income or sales taxes.\n <\/p>\n<\/blockquote>\n

Wait, wait, hold up\u2014state income\u00a0or<\/em>\u00a0sales taxes? Yep. Unfortunately, you can\u2019t deduct both state income\u00a0and<\/em>\u00a0sales tax (Uncle Sam sees that as trying to stick both hands in the cookie jar). You can combine property and sales taxes\u00a0or<\/em>\u00a0you can combine property and income taxes, but not all three. Deciding which combination works best for your tax return is a part of the fun of taking this tax deduction (sarcasm intended).\n <\/p>\n

How Do SALT Deductions Work?<\/h2>\n

Now, before you get too excited about the SALT deduction, keep in mind that the OBBBA puts a hard cap on it. Remember, the most you\u2019ll be able to deduct is $40,000\u2014or $20,000 if you\u2019re married filing separately.4<\/sup>\n <\/p>\n

That\u2019s really good news for taxpayers living in states with high property or state taxes. For example, let\u2019s say you paid $7,000 in property taxes and $9,000 in state income taxes for the current tax year. Before OBBBA, the SALT deduction was capped at $10,000. In that case, you couldn\u2019t deduct $16,000 from your federal income taxes. But now, you\u2019ll be able to deduct all of it\u2014<\/em>with plenty of room to spare!\n <\/p>\n

How Do You Claim the SALT Deduction?<\/h2>\n

Alright, now for the fun part. Luckily, claiming the SALT deduction on your federal income taxes isn\u2019t super complicated.\n <\/p>\n

1. Itemize your deductions.<\/h3>\n

At this point, you should know for sure you\u2019re not taking the standard deduction. Again, you can deduct up to $40,000, so if the SALT is your only tax deduction, you should only itemize if the amount of tax you are deducting is greater than the standard deduction.\n <\/p>\n

2. Decide to deduct either the sales or state income taxes.<\/h3>\n

Even if you\u2019re the kind of person who spends more time looking for something to watch on TV than actually watching TV,\u00a0this<\/em>\u00a0decision should be super obvious (thank goodness, right?): Pick the larger of the two.\n <\/p>\n

For instance, if you live in a high income-tax state\u2014like California, New Jersey or\u00a0New York\u2014you\u2019ll probably deduct your state and local\u00a0income<\/em>\u00a0taxes. On the other hand, if you live in a state with a high\u00a0sales<\/em>\u00a0tax but low or no\u00a0income<\/em>\u00a0tax\u2014like Louisiana,\u00a0Tennessee\u00a0or\u00a0Texas\u2014you\u2019ll probably deduct your sales tax if you itemize.\n <\/p>\n

But what if you spent an\u00a0equal<\/em>\u00a0amount of money on sales and income taxes? Well, in that case, pick the one you can back up with more evidence. You may have spent $5,000 on sales taxes, but if you don\u2019t have receipts to back it up (or you don\u2019t have time to dumpster dive in your filing cabinet), consider deducting the income tax instead.\u00a0\n <\/p>\n

3. Use Schedule A to claim the SALT deduction.<\/h3>\n

Finally, look at your Schedule A and report your numbers (you\u2019ll find the state and local tax on Line 5 of Schedule A).5<\/sup>\n <\/p>\n

\n

Expert Advice Delivered Straight to Your Inbox<\/h4>\n

Our weekly email newsletter is full of practical advice you can easily apply to your daily routine so you can win with your money, relationships and career.\n <\/p>\n<\/p><\/div>\n

Who Uses SALT Deductions?<\/h2>\n

You\u2019ll hear a lot of folks say the SALT deduction benefits taxpayers who live in states with high income and\u00a0property taxes\u00a0(think New York, New Jersey and California), which is partly true. But more so than that, the SALT deduction benefits\u00a0high-income taxpayers<\/em>\u00a0who live in states with high tax rates.\n <\/p>\n

The higher your income, the more you care about tax deductions, regardless of where you live because\u2014you guessed it\u2014you\u2019re taxed at a higher rate. So if you make a lot of money, don\u2019t rule out the SALT deduction, even if your state has low\u00a0income taxes.\u00a0\n <\/p>\n

Should You Take the SALT Deduction?<\/h2>\n

Remember: You can only <\/em>claim the SALT deduction if you itemize your deductions. And you should only itemize your deductions if that amount exceeds the standard deduction.\n <\/p>\n

For tax year 2025, the standard deduction is $15,750 for singles and anyone married filing separately, $31,500 for married couples filing jointly, and $23,625 for heads of household.6<\/sup>\n <\/p>\n

Since the standard deduction is lower than the $40,000 SALT deduction, you might <\/em>find yourself paying enough in state and local taxes to make itemizing your tax deductions worth it.\n <\/p>\n

You can also see if deducting your donations to charity, medical expenses and mortgage interest on top of your local taxes would push you over the standard deduction amount\u2014but it does mean you have to do some math.\n <\/p>\n

If you\u2019re still considering itemizing your deductions, or you\u2019ve got a more\u2014well,\u00a0salty<\/em>\u2014tax situation, you shouldn\u2019t let any eligible tax deduction go unclaimed. That\u2019s why we recommend working with a reliable tax expert. Truth is, missing out on deductions could end up costing you more than it would to work with a pro.\n <\/p>\n

\u00a0\n <\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Back in the old days, the state and local tax (SALT) deduction was arguably the most popular tax deduction in America. Get expert money advice to reach your money goals faster! You probably remember your parents or grandparents saving every receipt\u2014even on small purchases like a box of nails or a single heirloom tomato\u2014and stuffing<\/p>\n","protected":false},"author":1,"featured_media":24118,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[55],"tags":[],"class_list":{"0":"post-24117","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news"},"yoast_head":"\nHow Does the State and Local Tax Deduction Work? | IncrediPros<\/title>\n<meta name=\"description\" content=\"Back in the old days, the state and local tax (SALT) deduction was arguably the most popular tax deduction in America. 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