For tax year 2025, qualifying state and local taxes may be deductible up to a combined $40,000 for most taxpayers who itemize; married people filing separately have a $20,000 limit. The limit falls for taxpayers whose modified adjusted gross income exceeds specified thresholds, but cannot drop below $10,000—or $5,000 for married filing separately. The statutory amount changes in 2026, so $40,000 is not a permanent annual cap.
What is the SALT deduction cap?
SALT is short for state and local taxes. The cap limits how much of certain state and local taxes an eligible taxpayer can deduct on a federal return. For tax year 2025, the combined limit is $40,000 for most filing statuses and $20,000 for married filing separately, according to the IRS’s Publication 530 (2025).
This is an itemized deduction, not a tax credit: it reduces taxable income rather than directly reducing a tax bill dollar for dollar. Whether it lowers your bill, and by how much, depends in part on your marginal tax rate and other limits on itemized deductions. The Congressional Research Service outlines the policy and deduction framework in its report, Federal Deduction for State and Local Taxes.
Who can use the $40,000 limit?
The limit matters to taxpayers who itemize deductions and paid qualifying state or local taxes. It is not a flat payment or a guaranteed deduction: the deductible amount depends on qualifying taxes paid, filing status, income-based reduction, and the taxpayer’s other circumstances. The $40,000 limit applies to most filing statuses; married filing separately has its own lower limit.
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For tax year 2025, the IRS says the limit phases down when modified adjusted gross income (MAGI) exceeds $500,000 for most filing statuses, or $250,000 for married filing separately. The limit cannot be reduced below $10,000, or $5,000 for married filing separately. These are the 2025 figures in IRS Publication 530; check the publication and current IRS guidance for the return year you are filing.
Which taxes count—and which do not?
The IRS identifies state and local income taxes, general sales taxes, real property taxes, and qualifying personal property taxes as taxes that may fall within the combined SALT limit. You generally choose to deduct either state and local income taxes or general sales taxes, not both. See IRS Topic No. 503 for the categories and Schedule A rules.
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Not every payment to a state, local government, or homeowners association is a deductible tax. The IRS lists federal income taxes, Social Security taxes, transfer taxes, stamp taxes, homeowners association fees, and ordinary charges for water, sewer, or trash as nondeductible on Schedule A. Certain local-benefit charges tied to maintenance, repair, or interest may receive limited treatment, but ordinary service bills do not become SALT simply because they are collected locally.
Why the $40,000 figure is tied to a tax year
The $40,000 amount is the limit for tax year 2025, not a permanent figure and not a general label for every return filed in 2025. Tax year refers to the year the income and deductions relate to; filing year is when the return is submitted. The amendment text for H.R. 1 specifies a $40,400 amount for taxable years beginning in 2026, with later amounts subject to statutory indexing. The text is available in Senate Amendment 2360 to H.R. 1.
What the congressional “fight” can—and cannot—be said to show
The official record establishes the statutory structure reflected in the amendment text and the IRS’s guidance: a higher SALT limit for 2025, an income phase-down, a floor, and a specified 2026 amount. It does not by itself provide a complete chronology of lawmakers’ negotiations, establish every member’s position, or show whether the political dispute remains active today. The Congressional Research Service report describes policy options and the federal deduction, but it is not a complete account of the legislation’s political negotiations.
That distinction matters when reading claims about who prevailed or why. The enacted rule is verifiable from the government sources above; attributing motives or describing current bargaining requires dated statements or contemporaneous reporting. The available official sources support explaining what the law does, not presenting a definitive account of the entire political fight.
Quick Recap
How to assess your own potential deduction
- Confirm the tax year. Use the SALT limit and IRS instructions for the year covered by the return, rather than assuming the $40,000 figure applies indefinitely.
- Identify your filing status. For 2025, the limit is $20,000 if you are married filing separately; the $40,000 limit applies to most other filing statuses.
- Add only qualifying taxes paid. Separate deductible state and local taxes from excluded fees and service charges. IRS Topic No. 503 explains the categories.
- Check the MAGI phase-down. Compare your MAGI with the applicable threshold, then apply the statutory floor for your filing status. Use the IRS’s 2025 publication for 2025 returns.
- Consider whether itemizing benefits you. The SALT limit is one part of itemized deductions, not a credit. Your total itemized deductions and tax situation determine whether claiming them changes your taxable income.
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