The salt tax historically refers to a government levy on salt, a vital commodity. However, in the context of your query, "SALT tax" or "SALT deduction" commonly refers to the State and Local Tax (SALT) deduction in the United States federal tax system.

What is the SALT Deduction?

The SALT deduction allows U.S. taxpayers who itemize their deductions on their federal income tax returns to deduct certain taxes paid to state and local governments from their federally taxable income. These taxes include:

• State and local income taxes
• Property taxes (on real and personal property)
• Either state and local general sales taxes or income taxes (taxpayers must choose one, not both)

This deduction is designed to prevent double taxation on income taxed by both state/local and federal governments

Key Features

• The deduction reduces your taxable income by the amount of state and local taxes paid, lowering your overall federal tax liability.
• It is available only if you itemize deductions rather than taking the standard deduction.
• There is a cap on the SALT deduction: taxpayers can deduct up to $10,000 ($5,000 if married filing separately) of combined state and local taxes paid. This cap was introduced by the Tax Cuts and Jobs Act (TCJA) of 2017 and is effective through 2025

• The deduction tends to benefit higher-income taxpayers in states with high state and local taxes, such as New York, California, and New Jersey

Summary

The SALT tax deduction is a federal income tax provision allowing taxpayers to reduce their taxable income by the amount of certain state and local taxes paid, subject to a $10,000 cap. It aims to avoid double taxation but primarily benefits taxpayers in high-tax states who itemize deductions