- Introduction
- State and local income taxes
- Sales tax instead of income tax deduction
- State and local real and personal property taxes
- SALT deduction limits
- Taxes and fees you can’t deduct
- The bottom line
- References
State and local taxes you paid: Are they tax deductible?
- Introduction
- State and local income taxes
- Sales tax instead of income tax deduction
- State and local real and personal property taxes
- SALT deduction limits
- Taxes and fees you can’t deduct
- The bottom line
- References
Government services like roads, schools, and social programs don’t come free. To fund these necessities, federal, state, and local governments rely on taxes. Whether it’s income, property, or sales taxes, you and everyone else must contribute their share.
Because you pay taxes at the state and local level, the Internal Revenue Service (IRS) allows you to deduct state and local taxes (SALT) from your taxable income when filing your federal tax return. You can deduct state and local taxes only if you itemize your deductions using Form 1040 Schedule A.
Most filers take the standard deduction, which allows you to subtract a specific amount (for the 2024 tax year, it’s $14,600 for single filers; $29,200 for those married filing jointly) from your taxable income. But if you’ve run the numbers and determined that you would pay less in tax by itemizing, you have that option.
SALT allowed as itemized deductions include state and local income taxes (or state and local sales tax), state and local real property taxes, and state and local personal property taxes.
Key Points
- State and local taxes—such as income, real property, and personal property—are deductible if you itemize deductions using Form 1040 Schedule A.
- Some states have no income tax, while others have additional income tax at the local (county or city) level.
- The Tax Cuts and Jobs Act limits the state and local tax (SALT) deduction to $10,000 for individuals and couples filing jointly ($5,000 for those married filing separately).
State and local income taxes
Most states tax their residents’ income. If you’re a worker who receives a W-2, state and local taxes are typically deducted directly from your paycheck.
Twelve states tax personal income at flat rates (no matter how high or low your income, you pay one rate):
- Arizona
- Colorado
- Georgia
- Idaho
- Illinois
- Indiana
- Kentucky
- Michigan
- Mississippi
- North Carolina
- Pennsylvania
- Utah
Other states use a combination of marginal tax brackets, tax credits, and other methods that may or may not result in lower-income workers paying less tax. New Hampshire taxes investment income, not wages, while Washington State imposes a capital gains tax solely on amounts exceeding $250,000 annually.
In addition to being taxed at the state level, you may also pay local income tax, depending upon your municipality or county. Some local jurisdictions in these states levy local taxes:
- Alabama
- Colorado
- Delaware
- Indiana
- Iowa
- Kansas
- Kentucky
- Maryland
- Minnesota
- Missouri
- New Jersey
- New York
- Ohio
- Oregon
- Pennsylvania
- West Virginia
All state and local income taxes paid during the year, either through payroll deductions or payments made directly to your state or local government, are included in the federal SALT deduction.
Which states impose no income tax?
Several states have no income tax on wages, although they levy sales and real estate taxes (among others). As of 2024, these states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Sales tax instead of income tax deduction
If your state has no income tax or it is low, you may choose to deduct sales taxes you paid during the year instead of deducting state and local income taxes.
You can total the sales tax you paid throughout the year by saving each receipt. A simpler way is to use the IRS sales tax deduction calculator—just enter your ZIP code and answer a few quick questions.
State and local real and personal property taxes
The federal SALT deduction includes all state and local taxes paid for property you own.
- Real property taxes: If you own a home or land, you pay property tax to your local jurisdiction based on its value.
- Personal property taxes: In some states, you pay an annual tax on vehicles or boats you own.
SALT deduction limits
The Tax Cuts and Jobs Act (TCJA)—signed into law by then-President Donald Trump in 2017—placed a $10,000 cap on state and local tax deductions. (Those married and filing separately can each deduct up to $5,000.) Previously uncapped, the limit primarily affects those in high-tax states, where property, income, and sales taxes may easily exceed $10,000. The provision is set to expire at the end of 2025 unless Congress extends or revises it.
Taxes and fees you can’t deduct
You might pay several types of taxes and fees each year that aren’t considered state and local taxes. The IRS says none of these are deductible:
- Federal income taxes
- Social security taxes
- Transfer taxes on property sales
- Stamp taxes
- Homeowners association (HOA) fees
- Estate and inheritance taxes
- Payments for services such as water, sewer, or trash collection
Even if your state and local taxes total less than the $10,000 cap, these taxes and fees can’t be included in your SALT deduction calculation.
The bottom line
If itemizing gives you the lowest taxable income, consider it when filing your federal tax return. Itemizing allows you to deduct the state and local taxes you paid during the year—up to $10,000 for individuals or married couples filing jointly. (If married filing separately, each spouse can take $5,000.)
To claim the state and local tax (SALT) deduction, keep receipts for real estate and personal property taxes you paid, along with records of any other state or local taxes you paid. When filing your taxes, use these records to calculate the total deduction. Don’t include payroll deductions, which are listed on your W-2. If your state doesn’t have an income tax, you can still claim a deduction for sales tax. Either add up the sales tax paid using your saved receipts or use the IRS calculator to estimate the amount based on your income and location.
Staying informed about tax legislation—especially in 2025, when key provisions of the TCJA are set to expire—can help you know which records to keep and how changes might affect your tax return. Your tax software or tax preparer can guide you, and for the latest updates, visit Britannica Money’s tax channel.
References
- Topic No. 503, Deductible Taxes | irs.gov