The state and local tax deduction — also known as the SALT deduction — has changed quite a bit under the Tax Cuts and Jobs Act. But you may still qualify. Here’s everything you need to know.
The SALT deduction allows taxpayers to claim any state and local taxes they paid for the year. It reduces your taxable income dollar for dollar. But you must itemize to claim it.
Prior to the Tax Cuts and Jobs Act, the SALT deduction was unlimited. For 2021, taxpayers can’t deduct more than $10,000 or $5,000 if they’re married and filing separately.
The SALT deduction has these limits:
Starting in 2018, the SALT deduction limits were no longer unlimited. These are the SALT deduction limits for the past three years:
SALT deduction limits for 2018 to 2020
| Year | Single, married filing jointly, head of household, qualifying widower | Married, filing separately |
|---|---|---|
| 2020 | $10,000 | $5,000 |
| 2019 | $10,000 | $5,000 |
| 2018 | $10,000 | $5,000 |
Taxpayers living in states with high property, income or sales taxes are most impacted by the SALT deduction limit.
Here are 19 states that have average SALT claims over $10,000 each tax year:
Anyone who pays property, sales or income tax at the state or local level this year qualifies for the SALT deduction.
The following items are eligible under the SALT deduction:
| Any taxes paid in a previous year | |
| Estimated tax payments | |
| Extension tax payments | |
| Foreign income taxes | |
| Local income taxes | |
| Local sales taxes | |
| Mandatory contributions to state benefit funds | |
| Personal property taxes | |
| Prior year state and local income taxes that you paid this year | |
| Real estate property taxes | |
| State income taxes | |
| State sales taxes |
Use Schedule A to itemize your taxes and claim the SALT deduction. The process looks like this:
Watch out for these potential drawbacks if you’re thinking of claiming the SALT deduction:
If you qualify for the SALT deduction, you may also qualify for these related deductions:
You could write off 100% of your mortgage loan interest if your loan is less than $1 million.
If you’ve paid property taxes this year, you can deduct up to $10,000 or $5,000 if you’re married and filing separately.
The SALT deduction isn’t unlimited like it used to be. But you should still claim it if your itemized deductions are greater than your standard deduction.
Simplify the process by hiring a professional or shopping around for an online service that can help you file your taxes this season. These services can help you figure out what deductions you qualify for based on a series of questions. They’ll even calculate your itemized and standard deductions to see which one saves you the most money.
If you live in a state that has high income tax but low sales tax — like California or New York — you may save more money by deducting income tax.
But if you live in a state that has high sales tax — like Texas or Louisiana — it may make more sense to claim the sales tax.
Many high-tax states such as New Jersey, New York, Connecticut and Oregon have passed laws that allow taxpayers to convert part of their SALT payments into charitable contributions. These contributions are fully deductible as long as they don’t exceed 60% of a taxpayer’s adjusted gross income.
But the IRS has since passed regulations aimed at preventing these workarounds, so it’s best to consult a tax professional in your state for more information.
No. You can claim personal and real estate property taxes under the SALT deduction but not mortgage interest.
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