Quick answer

Since the Tax Cuts and Jobs Act (TCJA) of 2017, the SALT deduction — the itemized federal deduction for state and local income, sales and property taxes — has been capped at $10,000 for most filers ($5,000 for married filing separately). That cap remains in effect as of 2025; changing it would require an act of Congress (IRS; Tax Policy Center).

Why the cap matters

  • It directly increases taxable income for many taxpayers in states with high income and property taxes, which can push households into higher federal brackets or reduce eligibility for other tax-favored items. (Tax Policy Center)
  • The cap changes the trade-off between itemizing and taking the standard deduction, making itemizing less attractive for many middle-income taxpayers.
  • It has motivated states and filers to use legal workarounds and planning strategies — for example, the rise of pass-through entity (PTE) state taxes designed to shift state tax burden to the entity level. (Tax Foundation; IRS guidance on PTE taxes)

How the SALT cap works in practice

  • What’s included: Deductible SALT amounts on Schedule A generally include state and local income taxes (or state sales taxes in lieu of income taxes), and property taxes. For a married filing jointly return, the total deductible amount for those categories is limited to $10,000. (IRS Publication 17)
  • What’s excluded: State and local taxes paid to purchase goods and services (sales taxes are deductible only if you elect them instead of state income taxes), and federal taxes are never deductible. Certain fees and assessments are not treated as deductible property taxes.
  • Where you claim it: On Schedule A (Form 1040) as itemized deductions; you only benefit when your total itemized deductions exceed the standard deduction.

Who is most affected

  • Homeowners in high-property-tax jurisdictions (e.g., parts of New York, New Jersey, California) who also pay state income taxes.
  • High-income earners who previously deducted large state income taxes and property taxes.
  • Schedules and small-business owners may be affected indirectly, which prompted state-level policy responses.

Roughly ten million taxpayers historically claimed SALT deductions on their federal returns; however the distribution skews toward higher-income filers and those in states with higher levy levels. (Tax Policy Center)

Examples (typical client scenarios)

  • Married couple in New Jersey: pre-TCJA they deducted $20,000 in state income + property taxes; under current law they can deduct only $10,000, increasing taxable income and federal tax owed.
  • Single homeowner in Texas: low or no state income tax and relatively modest property taxes — the cap is not binding and they likely keep itemizing for mortgage and charitable deductions when beneficial.

State-level workarounds and their limits

In response to the cap, many states adopted or expanded pass-through entity taxes (PTE or PTET). These let partnerships, S corporations and sometimes LLCs pay state-level taxes at the entity level and provide owners with a state tax credit (or the entity takes the deduction), which can be deductible on the federal return without counting against a shareholder’s or partner’s $10,000 SALT cap — but this is complex:

  • Not every PTE is structured the same way; state rules and administrative procedures vary.
  • The IRS has issued guidance allowing certain PTE taxes to be treated as deductible at the entity level for federal purposes, but interpretation and implementation require careful review.
  • Benefits often depend on the entity’s makeup and the owners’ filing situations; many small-business owners consult a tax professional before electing into a PTE regime. (IRS; Tax Foundation)

If you’re interested in practical state-level options, see our guide on SALT Cap Workarounds and our deeper explainer on SALT Deduction basics.

Practical strategies a CPA might consider (real-world, actionable)

  1. Recalculate itemize vs. standard each year: Changes in medical expenses, mortgage interest, charitable giving or property taxes can flip the better choice. I run both scenarios for clients each year to avoid surprises.
  2. Bunch deductions: Time deductible expenses (charitable gifts, unreimbursed medical or state taxes in certain years) so you itemize in high-deduction years and take the standard deduction in others. See our guide on bunching charitable contributions.
  3. Consider a PTE tax election (for eligible pass-throughs): Work with your CPA and state tax counsel to evaluate whether a state’s elective entity-level tax produces a federal deduction that reduces tax liability net of state credits.
  4. Use tax-advantaged accounts: Maximize retirement accounts (401(k), IRA where applicable) and HSAs to reduce adjusted gross income and taxable income, potentially softening SALT cap impact.
  5. Reassess property tax appeals and planning: If high property taxes drive your SALT exposure, look at local appeal options, reassessments, or timing of payments when possible.

Common misconceptions

  • Myth: “Everyone can deduct $10,000.” Fact: The $10,000 ($5,000 MFS) cap applies only to the sum of state and local income, sales, and property taxes claimed on Schedule A — not a universal $10,000 credit or deduction.
  • Myth: “The cap will definitely expire in 2025.” Fact: While portions of TCJA sunset in 2025, the SALT cap remains law unless changed by new legislation; there is ongoing political debate but no guaranteed change. (Congressional actions would be required.)

How to measure the impact on your taxes

  1. Gather last year’s figures: state income tax withheld + estimated state tax due + property tax paid + state sales taxes (if you elected that route).
  2. Run both returns: itemized vs. standard deduction, including a scenario with the $10,000 cap enforced.
  3. Model planning moves: bunching, timing property tax payments, or potential PTE election—compare federal tax, state tax credits, and administrative cost.

Questions to ask your advisor

  • How much of my itemized deduction is composed of SALT items each year?
  • Do I have pass-through income that a state PTE election would affect?
  • Will bunching charitable or medical expenses produce larger tax savings than the administrative burden to implement?

Policy context and outlook

The SALT cap was enacted as part of a broader tax reform in 2017. Since then it has remained politically controversial, especially in high-tax states where constituents see a larger federal tax increase. Proposals to repeal or raise the cap surface periodically in Congress and state legislatures continue to innovate with entity-level workarounds. For now (2025) taxpayers should assume the $10,000/$5,000 limit applies until Congress acts. (Tax Policy Center; IRS)

Professional disclaimer

This article is educational and does not constitute individualized tax advice. Tax rules can be complex and state-specific; consult a CPA or tax attorney about your unique situation before making elections or material changes to your tax strategy.

Authoritative resources

  • IRS — publications on itemized deductions and Schedule A (irs.gov)
  • Tax Policy Center — analysis and distributional effects of the SALT cap (taxpolicycenter.org)
  • Tax Foundation — state-level responses and PTE analysis (taxfoundation.org)