The SALT deduction, or state and local tax deduction, is a federal tax provision that allows taxpayers in the United States who itemize their deductions to deduct certain state and local taxes paid from their federally taxable income. This includes state and local income taxes, property taxes, and either state and local sales taxes or income taxes-but not both in the same year

. The purpose of the SALT deduction is to prevent double taxation, since taxpayers pay taxes to state and local governments as well as to the federal government. By deducting these taxes on their federal tax returns, taxpayers reduce their overall taxable income and thus their federal tax liability

. Key points about the SALT deduction:

• Eligible taxes include state and local income taxes, property taxes on real and personal property (such as homes and vehicles), and either state and local sales taxes or income taxes

• To claim the deduction, taxpayers must itemize deductions on their federal tax return (Form 1040, Schedule A). Taxpayers who take the standard deduction cannot claim SALT

• Since the Tax Cuts and Jobs Act (TCJA) of 2017, the SALT deduction is capped at $10,000 per year ($5,000 if married filing separately). This cap applies through the 2025 tax year, after which it is scheduled to expire unless extended by Congress

• The deduction disproportionately benefits higher-income taxpayers in states with higher state and local taxes

Example: If a taxpayer paid $8,000 in property taxes and $5,000 in state income taxes in a year, they would have $13,000 in eligible SALT payments. However, due to the $10,000 cap, they can only deduct $10,000 on their federal return, reducing their taxable income by that amount

. In summary, the SALT deduction reduces your federal taxable income by allowing you to deduct certain state and local taxes paid, subject to a $10,000 limit, and is available only if you itemize deductions rather than taking the standard deduction