The SALT deduction, which is an acronym for the State and Local Tax Deduction, is a specific deduction for taxpayers who itemize their deductions to ensure that their federally taxable income decreases. Those taxpayers can easily deduct around $10,000 for the taxes of 2024 and around $40,000 in 2025 on various items, such as sales, property, or income tax that they have already paid to the government. 

This specific limit for the SALT tax is referred to as the SALT cap that was set by the Tax Cuts and Jobs Act (TCJA). However, with the introduction of the One Big Beautiful Bill Act (OBBBA), the cap limit was increased to $40,000 for the fiscal year 2025. This SAL deduction is an attractive aspect for many taxpayers, especially those in high-tax states, to evade double taxation. 

Why does the SALT deduction exist?

The SALT tax deduction helps people avoid getting taxed twice on the same income. Basically, it lets you shave off from your federal tax bill the money you already paid to state and local governments. So, if you’ve shelled out a lot in state or local taxes, you don’t get penalized again when you file your federal return.

You see more people using the SALT deduction in places with high state and local taxes, such as New York, Connecticut, New Jersey, and California, where government services are usually more generous, and incomes tend to be higher.

How does the SALT deduction actually work?

If you qualify, you can lower your federally taxable income by the amount you paid in state and local taxes during the year. There’s a cap, though: for 2024, you can deduct up to $10,000 ($5,000 if you’re married and filing separately). In 2025, the limit goes up to $40,000 ($20,000 for married filing separately).

The deduction covers property taxes, plus either your state and local income taxes or your state and local sales taxes, but not both. When you itemize your deductions, you have to pick between deducting income taxes or sales taxes.