What are SALT Deductions and Why Do They Affect Taxpayers
Margo DeSantis
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What are SALT Deductions and Why Do They Affect Taxpayers
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SALT deductions are State and Local Tax deductions.
These regional deductions allow you to reduce your federal taxable income by deducting state and local income taxes or sales tax. You can only deduct one, either income taxes or state sales taxes.
Overall, these deductions can significantly reduce your federal tax bill, especially if you live in a high tax state like New York or California.
Note that the SALT deduction is capped at $10,000 per year.
What Counts As A SALT Deduction?
Under SALT, you can deduct:
- State and local income tax or state sales taxes
- Property or real estate taxes
- Personal property taxes (vehicle registration fees)
Example: If you paid $10,000 in property tax and $12,000 in state income tax, you can only deduct $10,000 maximum under SALT.
Why Is the SALT Deduction Cap Controversial?
The $10,000 cap was set in 2017 by the Tax Cuts and Jobs Act. Before that time, there was no limit, so high-income households could deduct much more from their annual tax bill.
The cap especially impacts taxpayers in high-tax states, saying it unfairly punishes homeowners in:
- California
- New York
- New Jersey
- Illinois
Additionally, it can impact taxpayers who are:
- Dual-income households
- Homeowners in high-property-tax regions
Proposed Changes to the SALT by Republicans in 2025
Recent Republican lawmakers' proposals could mean the SALT cap:
- Increases to $20,000–$50,000
- Is removed entirely
If passed, these changes could apply retroactively to the 2024 and 2025 tax years, giving some higher-income households larger refunds and no double taxation.
Who Benefits From Changes to SALT?
Taxpayers with large property taxes and income tax bills stand to gain the most if the SALT cap is increased or removed entirely.
Conclusion: How Tax Attorneys of America Helps
We have a network of tax professionals who can develop strategies to optimize your deductions, assist in amending returns, and advocate for maximum tax savings.
Ready to maximize your deductions? Schedule a free consultation
