Deduction of State and Local Taxes (SALT)

Deduction of State and Local Taxes (SALT) refers to the tax benefit that allows taxpayers to deduct certain taxes paid to state and local governments from their federal taxable income.

This deduction can include various types of taxes such as state income taxes, local income taxes, sales taxes, and property taxes. However, the Tax Cuts and Jobs Act of 2017 placed a cap on the SALT deduction, limiting it to $10,000 for individuals and married couples filing jointly, or $5,000 for married individuals filing separately.

For example, if a taxpayer pays $7,000 in state income tax and $5,000 in property tax, they can only deduct a total of $10,000 of SALT from their federal taxable income, due to the limitation.