Introduction
The State and Local Tax (SALT) deduction allows taxpayers to deduct certain state and local taxes
from their federal taxable income. Under IRC § 164, you can deduct state and local income taxes,
property taxes, and sales taxes, but the deduction is capped at $10,000 ($5,000 for Married Filing
Separately).
This guide explains who qualifies, which taxes are deductible, and how to claim the SALT deduction
on your 2025 tax return.
Who Qualifies for the SALT Deduction?
- Taxpayers who itemize deductions on Schedule A (Form 1040)
- Homeowners paying property taxes
- Taxpayers in high-tax states (e.g., CA, NY, NJ, IL, MA)
Important: If you take the standard deduction, you cannot claim SALT deductions.
What State and Local Taxes Are Deductible?
1. State and Local Income Taxes
- State income taxes withheld from wages (W-2, Form 1099)
- Estimated tax payments to state and local governments
- Taxes paid for a prior-year state tax return
2. Property Taxes
- Real estate taxes on primary and secondary homes
- Co-op and condo property taxes (your share of taxes paid)
- Personal property taxes (e.g., car registration fees based on value)
3. State and Local Sales Taxes (Alternative Deduction)
- If you live in a no-income-tax state (e.g., FL, TX, WA), you can deduct state sales tax instead
of income tax. - Sales tax deduction method:
- Use actual receipts OR
- Use the IRS Sales Tax Deduction Calculator
Important: You cannot deduct both state income tax and sales tax—you must choose one.
What Taxes Are NOT Deductible?
Federal income taxes
- Social Security and Medicare taxes
- Estate and inheritance taxes
- HOA fees
- Utility bills
How to Claim the SALT Deduction
Step 1: Determine If You Should Itemize
Compare your total itemized deductions to the 2025 standard deduction:
- $14,600 (Single)
- $29,200 (Married Filing Jointly)
- $21,900 (Head of Household)
If your itemized deductions exceed the standard deduction, itemizing may reduce your taxable
income.
Step 2: Gather Required Documents
- Form W-2 and 1099s (State and local tax withholding)
- Property tax bills
- Receipts for major purchases (if claiming sales tax deduction)
Step 3: Report on Schedule A (Form 1040)
- Line 5a: State and local income or sales taxes
- Line 5b: Real estate taxes
- Line 5c: Personal property taxes
- Line 5d: Total SALT deduction (capped at $10,000)
IRS Forms & Compliance Checklist
- Form 1040 – Main tax return
- Schedule A (Form 1040) – Itemized deductions
- IRS Sales Tax Deduction Calculator (if deducting sales tax)
Conclusion
The SALT deduction allows taxpayers to lower federal taxable income by deducting state income,
property, or sales taxes. Since the deduction is capped at $10,000, consider whether itemizing or
taking the standard deduction is more beneficial.
For expert tax planning, schedule a consultation with Anshul Goyal, CPA EA FCA, a licensed tax
professional and IRS representative.
Frequently Asked Questions (FAQs)
1. Can I deduct both state income tax and sales tax?
No, you must choose one—either state income tax or sales tax.
2. Can I deduct property taxes on an investment property?
Yes, but claim them on Schedule E (rental properties) instead of Schedule A.
3. Are vehicle registration fees deductible?
Yes, if the fee is based on the value of the vehicle (not a flat fee).
4. Does the SALT cap apply to businesses?
No, the $10,000 cap applies only to individuals, not businesses.
5. Can I deduct real estate taxes on a second home?
Yes, but they are included in the $10,000 total cap.
About Our CPA
Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant and an IRS Enrolled Agent (EA).
He specializes in state tax deductions, real estate taxes, and IRS compliance.
Schedule a consultation today with Anshul Goyal, CPA, to maximize your SALT deduction!