Glossary

SALT deduction

A federal income tax deduction for state and local taxes paid, capped at $10,000 from 2018 through 2025 and since raised.

Also called: SALT cap, state and local tax deduction

The state and local tax (SALT) deduction lets taxpayers who itemize deduct certain state and local taxes, such as property taxes and income or sales taxes, from federal taxable income. It has existed since the income tax began in 1913.

The Tax Cuts and Jobs Act of 2017 capped the deduction at $10,000 per household for 2018 through 2025, while nearly doubling the standard deduction, so fewer taxpayers itemize. The cap hit residents of high-tax states such as New York, New Jersey and California hardest, and some states created workarounds, such as taxes on pass-through entities. The 2025 reconciliation law raised the cap for a period, with limits for high earners; check current law for the figures.

Supporters of the deduction, mostly from high-tax states in both parties, say that it avoids double taxation and prevents the federal government from taxing money that states and localities collect. Opponents, many from low-tax states, argue that it effectively subsidizes high-tax state governments, mostly benefits higher earners and weakens federalism's incentive for fiscal discipline. It is the subject of bargaining in budget reconciliation bills. The deduction is a classic tax expenditure.

Last reviewed November 8, 2026

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Related terms

Tax expenditure A provision of the tax code, such as a deduction or credit, that reduces tax owed to encourage a behavior, functioning like government spending. Federalism A system dividing governing power between a national government and state governments, each with its own sphere of authority. Progressive tax A tax whose rate rises as the taxpayer's income or wealth rises, so higher earners pay a larger share. Effective tax rate The share of total income a person or company actually pays in taxes after deductions and credits. Budget reconciliation A fast-track budget process that lets the Senate pass certain tax and spending legislation by simple majority, without a filibuster.