Homeowners who itemize their tax returns can deduct the property taxes they pay on their residence up to a limit. The state and local tax (SALT) deduction allows taxpayers to deduct up to $10,000 of the money they spend on certain state and local taxes — including property, income, and sales tax.
When are taxes due this year? And other important dates Those who take advantage of the SALT deduction have to choose between income and sales tax — you can’t deduct both. Before the Tax Cuts and Jobs Act (TJCA), there was no cap, but now, the maximum SALT deduction is $10,000. However, that cap is set to expire at the end of tax year 2025.
According to the IRS, the taxes and fees that taxpayers can’t claim as SALT deductions include:
- Social security taxes
- Federal income taxes
- Transfer taxes (such as taxes imposed on the sale of property)
- Stamp taxes
- Homeowner’s association fees
- Estate and inheritance taxes
- Service charges for water, sewer, or trash collection
Who benefits?
Depending on where you live, the property tax deduction can be valuable. Taxpayers with higher tax liabilities in areas with higher state and local tax rates tend to see the most significant benefits from the SALT deduction.
Before the TJCA, 91% of the benefit of the SALT deduction was claimed by those with income above $100,000 and concentrated in just six states, according to the Tax Foundation.