The $10,000 SALT Cap, Explained
Before 2018 you could deduct unlimited state and local taxes on your federal return. The Tax Cuts and Jobs Act capped it at $10,000 — and reshaped the math of itemizing.
What 'SALT' actually covers
State and Local Taxes includes: state income tax (or state sales tax, you pick one), local income tax, and real estate property tax. Combined, the deduction is capped at $10,000 per return ($5,000 if married filing separately).
Why the cap stings in high-tax states
A NY/NJ/CA homeowner easily pays $20K+ in combined state income and property tax. Pre-2018 they deducted all of it. Today, $10K of it is permanently lost on the federal return.
Sales tax election if you're in a no-income-tax state
Florida, Texas, Washington, Nevada, Tennessee, South Dakota, and Wyoming residents elect to deduct sales tax instead. The IRS publishes optional sales tax tables — add actual receipts for big purchases like cars and boats.
The PTET workaround for business owners
Most states now offer a Pass-Through Entity Tax election. The S-corp or partnership pays state tax at the entity level (fully deductible federally) and the owner gets a state credit. Net effect: the SALT cap is sidestepped on business income.
What's NOT counted toward the cap
- Federal taxes
- Foreign taxes (separate foreign tax credit)
- Inheritance and estate taxes
- Taxes on business or rental property (deducted on Schedule C or E)
Is the cap permanent?
Under current law it expires after 2025 along with most of the TCJA individual provisions. Whether Congress extends, modifies, or lets it sunset is the single biggest open question in personal tax for 2026.
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