SALT Cap
The $10,000 annual limit on the federal deduction for state and local taxes (income/sales tax plus property tax), enacted by the Tax Cuts and Jobs Act of 2017.
The SALT cap is the $10,000 annual limit ($5,000 for married filing separately) on the federal itemized deduction for state and local taxes, which was introduced by the Tax Cuts and Jobs Act of 2017. Before the cap, taxpayers could deduct the full amount of state and local income taxes (or sales taxes) and property taxes on their federal return.
The cap most significantly affects homeowners in high-tax states like California, New York, New Jersey, Connecticut, and Illinois, where combined state income tax and property tax bills frequently exceed $10,000. For example, a homeowner paying $8,000 in property tax and $12,000 in state income tax would only deduct $10,000 rather than the full $20,000.
The SALT cap was scheduled to sunset after 2025 under the original TCJA provisions. Congress has debated various proposals to modify, raise, or eliminate the cap. Some states have implemented pass-through entity tax (PTET) elections as workarounds, allowing S corporations and partnerships to pay state tax at the entity level and claim the deduction outside the individual SALT cap.
Related Terms
SALT Deduction
An itemized deduction for state and local taxes paid, including income tax (or sales tax) and property tax. Currently capped at $10,000 per return ($5,000 for married filing separately).
Itemized Deduction
Specific expenses you can deduct instead of taking the standard deduction, including mortgage interest, state/local taxes (up to $10,000), charitable donations, and medical expenses.
State Income Tax
Income tax levied by individual states, in addition to federal income tax. Rates and structures vary widely — some states have no income tax, while others have rates up to 13.3%.
Standard Deduction
A fixed dollar amount that reduces your taxable income, available to all filers who do not itemize. For 2025, it is $15,000 for single filers and $30,000 for married filing jointly.
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