What Is the SALT Deduction?
The State and Local Tax (SALT) deduction allows taxpayers who itemize their federal return to deduct the state and local taxes they pay. This includes:
- State income tax (or sales tax, if you choose sales tax instead)
- Local income tax (e.g., New York City income tax)
- Property tax on your primary residence and other real property
Since the Tax Cuts and Jobs Act (TCJA) of 2017, the total SALT deduction has been capped at $10,000 ($5,000 for married filing separately). Before the cap, there was no limit.
States Most Impacted by the SALT Cap
States with high income tax rates AND high property values are disproportionately affected:
| State | Avg. State Income Tax | Avg. Property Tax | Avg. Total SALT | Amount Over Cap |
|---|---|---|---|---|
| New York | $7,200 | $8,500 | $15,700 | $5,700 |
| New Jersey | $5,800 | $9,200 | $15,000 | $5,000 |
| California | $6,500 | $5,600 | $12,100 | $2,100 |
| Connecticut | $5,900 | $7,400 | $13,300 | $3,300 |
| Massachusetts | $4,700 | $6,300 | $11,000 | $1,000 |
| Illinois | $3,700 | $5,800 | $9,500 | Under cap |
| Maryland | $4,100 | $4,200 | $8,300 | Under cap |
Note: Figures are approximate averages for households earning $100,000-$200,000. Actual amounts vary by income, home value, and location within the state.
SALT Cap Workarounds
1. Pass-Through Entity Tax (PTET) Election
The most significant workaround. Over 30 states now offer PTET elections that allow S-corporations and partnerships to pay state tax at the entity level. Since this is a business deduction (not a personal SALT deduction), it is not subject to the $10,000 cap. States offering PTET include: CA, CT, GA, IL, MA, MD, NJ, NY, OH, PA, VA, and many more.
2. Charitable Contributions to State Programs
Some states offer tax credits for contributions to state-approved charitable organizations (e.g., school tuition programs). The contribution counts as a charitable deduction (not SALT) but generates a state tax credit.
3. Timing Property Tax Payments
If you are close to the $10,000 cap, you may be able to accelerate or defer property tax payments across tax years to maximize your deduction in years when you itemize.
Will the SALT Cap Change?
The TCJA SALT cap was originally set to expire December 31, 2025. Key proposals under debate:
- Full elimination: Some legislators propose removing the cap entirely (estimated cost: $100B+ per year in lost federal revenue)
- Higher cap: Proposals range from $20,000 to $80,000 (with income phase-outs)
- Extension of current cap: The most likely outcome based on current legislative dynamics
- Income-based phase-out: Some proposals cap SALT at $10K for income over $400K but raise it for lower earners
Check IRS.gov for the latest updates.
Frequently Asked Questions
What is the SALT deduction?
The SALT deduction allows itemizers to deduct state/local income (or sales) tax plus property tax from federal taxable income, capped at $10,000 since 2018.
What is the current SALT cap?
$10,000 ($5,000 married filing separately) for 2026. The cap was introduced by TCJA 2017.
Which states are most affected?
New York, New Jersey, California, Connecticut, and Maryland -- states with high income taxes AND property taxes.
Are there workarounds?
Yes. The main workaround is PTET (Pass-Through Entity Tax) election, available in 30+ states for business owners.
Will the cap change?
The original cap was set to expire after 2025. Congress may extend, modify, or eliminate it. Check IRS.gov for updates.