What is the SALT deduction and who can claim it?

The State and Local Tax (SALT) deduction allows taxpayers who itemize to deduct state and local income taxes (or sales taxes) plus property taxes paid during the year. Since 2018, the SALT deduction has been capped at $10,000 per year ($5,000 for married filing separately). Taxpayers in high-tax states like California, New York, and New Jersey are most affected by this cap. Book a Free Call →

What is the $10,000 SALT cap and when does it expire?

The Tax Cuts and Jobs Act of 2017 capped the SALT deduction at $10,000 for all filing statuses except married filing separately ($5,000). This cap is currently scheduled to expire after December 31, 2025. The One Big Beautiful Budget Act (OBBBA) proposed raising the cap to $40,000 for incomes up to $500,000. Uncle Kam monitors all legislative developments. Book a Free Call →

What taxes are included in the SALT deduction?

The SALT deduction includes: (1) state and local income taxes OR state and local general sales taxes (you choose one), and (2) state and local real property taxes. Foreign income taxes are not included. The combined total of all these taxes is subject to the $10,000 cap for itemizers. Book a Free Call →

Should I deduct state income taxes or state sales taxes?

You can deduct either state and local income taxes OR state and local general sales taxes — not both. For most people in states with income tax, the income tax deduction is larger. However, residents of states without income tax (like Texas, Florida, Nevada) should use the sales tax deduction. The IRS provides optional sales tax tables to simplify the calculation. Book a Free Call →

Can I deduct property taxes on multiple properties?

Yes — you can deduct property taxes on all real property you own (primary residence, vacation home, rental property), but the total SALT deduction (income/sales tax plus all property taxes) is still capped at $10,000. Property taxes on rental properties are deducted separately on Schedule E as a business expense and are NOT subject to the $10,000 SALT cap. Book a Free Call →

What is the Pass-Through Entity Tax (PTET) SALT workaround?

Many states have enacted Pass-Through Entity Tax (PTET) laws that allow S-corps, partnerships, and LLCs to pay state income tax at the entity level. The entity deducts the PTET as a business expense (not subject to the $10,000 cap), and owners receive a state tax credit. This effectively restores the full SALT deduction for business owners. Uncle Kam implements PTET strategies for eligible clients. Book a Free Call →

Does the SALT deduction apply if I take the standard deduction?

No — the SALT deduction is only available to taxpayers who itemize deductions on Schedule A. If your total itemized deductions (including SALT, mortgage interest, charitable contributions, etc.) don't exceed the standard deduction ($15,000 single / $30,000 MFJ in 2026), you should take the standard deduction and the SALT deduction provides no benefit. Book a Free Call →

How does the SALT cap affect high-income taxpayers in high-tax states?

Taxpayers in states like California (13.3% top rate), New York (10.9%), and New Jersey (10.75%) with high incomes and valuable homes often pay $50,000–$100,000+ in state income and property taxes annually. The $10,000 cap means they lose $40,000–$90,000 in deductions, costing them $15,000–$33,000+ in additional federal taxes. PTET strategies can recover much of this loss for business owners. Book a Free Call →

Can I prepay state taxes to maximize the SALT deduction?

You can prepay property taxes that are due in the following year if the taxing authority has assessed the tax and you pay before December 31. However, you CANNOT prepay state income taxes for the following year — only taxes actually due in the current year are deductible. The IRS has specifically ruled against prepaying estimated state income taxes to accelerate the deduction. Book a Free Call →

Are vehicle registration fees deductible under SALT?

Vehicle registration fees are deductible as part of the SALT deduction ONLY if they are assessed based on the value of the vehicle (ad valorem taxes). Flat fees based on vehicle weight or other factors are not deductible. In states like California, the Vehicle License Fee (VLF) is value-based and deductible. Check your state's fee structure to determine deductibility. Book a Free Call →

What is the SALT deduction for married filing separately?

Married couples filing separately each have a $5,000 SALT cap (half of the $10,000 limit for joint filers). This means filing separately does NOT increase the total SALT deduction for a married couple — it's still $10,000 combined. Filing separately is generally not beneficial for SALT purposes and may cause you to lose other deductions and credits. Book a Free Call →

Can I deduct state taxes paid on investment income?

State taxes paid on investment income (dividends, capital gains, interest) are included in the SALT deduction as part of your total state income tax. They are subject to the $10,000 cap along with all other state and local taxes. There is no separate treatment for investment-related state taxes on Schedule A. Book a Free Call →

Are foreign property taxes deductible under SALT?

No — the SALT deduction only covers US state and local taxes. Foreign property taxes are not deductible on Schedule A. However, foreign income taxes may be deductible or eligible for the foreign tax credit on Form 1116. Uncle Kam advises on the optimal treatment of foreign taxes for taxpayers with international assets. Book a Free Call →

What records do I need to claim the SALT deduction?

Keep records of: state and local income tax withholding (from W-2s and 1099s), estimated state tax payments made during the year, property tax bills and payment receipts, and any state tax refunds received (which may be taxable in the following year). Your state tax return and property tax statements are the primary documentation. Book a Free Call →

Is a state tax refund taxable if I claimed the SALT deduction?

If you itemized and deducted state income taxes in the prior year, a state tax refund is generally taxable as income in the year received (the 'tax benefit rule'). However, if the SALT cap limited your deduction (i.e., you couldn't deduct the full amount), only the portion that actually reduced your taxes is taxable. Uncle Kam handles this calculation on your return. Book a Free Call →

Can business owners deduct state taxes above the $10,000 SALT cap?

Yes — through the Pass-Through Entity Tax (PTET) strategy. Business owners in states with PTET laws can have their entity pay state income tax at the entity level, deducting it as a business expense on Schedule E or the corporate return. This bypasses the $10,000 individual SALT cap entirely. Uncle Kam implements PTET for eligible S-corp, partnership, and LLC clients. Book a Free Call →

How do I report the SALT deduction on my tax return?

The SALT deduction is reported on Schedule A (Itemized Deductions), Lines 5a–5e. Line 5a is for state and local income taxes (or sales taxes), Line 5b is for state and local general sales taxes (if elected), and Line 5c is for state and local real estate taxes. The total is capped at $10,000 on Line 5e. Book a Free Call →

Should I move to a no-income-tax state to avoid the SALT limitation?

Relocating to a state with no income tax (Texas, Florida, Nevada, Washington, etc.) eliminates state income tax entirely — not just the deduction limitation. For high earners in California or New York, this can save $50,000–$200,000+ annually. However, the move must be genuine (domicile change, 183-day rule). Uncle Kam advises on residency planning for high-income clients. Book a Free Call →

How does the SALT deduction interact with the alternative minimum tax (AMT)?

State and local taxes are NOT deductible for AMT purposes — this was true even before the $10,000 cap. If you're subject to AMT, the SALT deduction provides no benefit at all. The AMT exemption has been increased significantly, so fewer taxpayers are subject to AMT today. Uncle Kam calculates your regular tax vs. AMT to determine the actual value of the SALT deduction for you. Book a Free Call →

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What Is the SALT Deduction?

The State and Local Tax (SALT) deduction allows taxpayers who itemize to deduct up to $10,000 ($5,000 if married filing separately) of state and local taxes paid during the year. This cap was introduced by the Tax Cuts and Jobs Act (TCJA) of 2017 and remains in effect through at least 2025. Qualifying taxes include state and local income taxes (or sales taxes, if you elect), and real estate property taxes on your primary and secondary residences.

Who Can Claim the SALT Deduction?

Taxpayers who itemize deductions on Schedule A (not those taking the standard deduction)
Homeowners paying state and local property taxes
Residents of high-tax states such as California, New York, New Jersey, Illinois, and Massachusetts
Taxpayers with significant state income tax withholding or estimated payments

What Taxes Qualify for SALT?

State and local income taxes — withheld from wages or paid as estimated taxes
State and local general sales taxes — you can elect to deduct these instead of income taxes (useful in states with no income tax)
Real estate taxes — property taxes on your home(s), but NOT on investment or rental properties (those go on Schedule E)
Personal property taxes — e.g., annual vehicle registration fees based on value

The $10,000 SALT Cap: What It Means

The SALT cap limits the combined deduction for all state and local taxes to $10,000 per return (regardless of filing status, except MFS which is $5,000). This disproportionately affects taxpayers in high-tax states. For example, a California homeowner paying $8,000 in state income tax and $7,000 in property taxes has $15,000 in SALT — but can only deduct $10,000.

SALT Workarounds for Business Owners

Business owners in states with Pass-Through Entity Tax (PTET) laws can bypass the $10,000 SALT cap. The entity pays state income tax at the business level, deducting it as a business expense — which is not subject to the individual SALT cap. This strategy is available in most states and can save thousands annually for S-corp, partnership, and LLC owners.

2026 Legislative Update: OBBBA SALT Increase

The One Big Beautiful Budget Act (OBBBA) proposed raising the SALT cap to $40,000 for taxpayers with income up to $500,000, phasing down above that threshold. If enacted, this would provide significant relief for middle and upper-middle income taxpayers in high-tax states. Uncle Kam monitors legislative developments and will advise clients on planning opportunities as the law evolves.

SALT Deduction vs. Standard Deduction

The SALT deduction only benefits you if you itemize. With the standard deduction at $14,600 (single) and $29,200 (married filing jointly) for 2024, many taxpayers find the standard deduction exceeds their total itemized deductions. However, if you have significant mortgage interest, charitable contributions, and SALT, itemizing may still be worthwhile.

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State And Local Tax Deduction Salt

What Is the SALT Deduction?

Who Can Claim the SALT Deduction?

What Taxes Qualify for SALT?

The $10,000 SALT Cap: What It Means

SALT Workarounds for Business Owners

2026 Legislative Update: OBBBA SALT Increase

SALT Deduction vs. Standard Deduction

State And Local Tax Deduction Salt FAQs

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