What is the SALT Deduction? (And Why High Earners Hate It)
If you live in Texas or Florida, you probably don’t care. But if you own a home in New York, New Jersey, or California, the “SALT Cap” is your worst enemy. Here is why you are limited to deducting only $10,000, and what happens now that the law is set to expire.
The Cap
$10,000
Max DeductionLimit
Includes
Prop + Inc
State TaxesTotal
Status
Sunset?
Expires End of ’25News
The SALT Bucket Formula
You can’t deduct everything. You have to choose. The SALT deduction is a bucket that fills up with two things.
| Component 1 | Component 2 (Pick One) | Total Limit |
|---|---|---|
| Property Taxes | State Income Tax | $10,000 |
| (Real Estate Tax) | OR Sales Tax* |
*Sales Tax Strategy
If you live in a state with NO income tax (like Texas, Florida, Washington), you choose Sales Tax instead.
You can deduct the sales tax you paid on big purchases (like a new car or boat) plus your property tax.
The Pain of the Cap
The 2026 Cliffhanger: Will it Expire?
The $10,000 cap was part of the “Tax Cuts and Jobs Act” (TCJA) of 2017. That law is scheduled to sunset (expire) after Dec 31, 2025.
- For 2025 Taxes (Filed now, in early 2026): The $10,000 cap is STILL IN EFFECT. You cannot deduct more than $10k this year.
- For 2026 Taxes (Filed next year): Unless Congress votes to extend the law, the cap disappears, and the deduction becomes unlimited again.
- The Political Fight: High-tax states want the cap gone. Low-tax states want to keep it to pay for other tax cuts. Watch the news closely.
Pro Tip: Don’t File “Married Separately”
People think: “If we file separately, we each get $10,000, right? Total $20,000?”
The IRS is Ahead of You
NO. The law explicitly closes this loophole.
If you are Married Filing Separately (MFS), your SALT cap drops to $5,000 each.
Total for the couple remains $10,000. There is no escape.
If you are Married Filing Separately (MFS), your SALT cap drops to $5,000 each.
Total for the couple remains $10,000. There is no escape.
Frequently Asked Questions
Does the Standard Deduction cover this?
Yes. If your total itemized deductions (SALT + Mortgage Interest + Charity) are less than the Standard Deduction (~$30,000 for married), you should just take the Standard Deduction. The SALT cap doesn’t matter to you.
Can I deduct Foreign Property Tax?
No. You cannot deduct property taxes paid on foreign real estate (e.g., a vacation home in Italy). The SALT deduction is strictly for U.S. state and local taxes.