How to Calculate the State and Local Income Tax Deduction

To calculate your state and local tax deduction, add up the qualifying state and local taxes you paid during the year, pick the larger of your income taxes or your general sales taxes (you can’t claim both), add your real estate and personal property taxes, and then apply the federal cap. For 2026, that cap is $40,400 for most filers and $20,200 if you’re married filing separately. For 2025 returns filed in early 2026, the cap is $40,000 and $20,000. You report the final figure on Schedule A of Form 1040, which means you have to itemize.¹²

First, Confirm Itemizing Beats the Standard Deduction

The SALT deduction only helps if you itemize on Schedule A. Itemizing pays off when your total deductible expenses — SALT, mortgage interest, charitable donations, qualifying medical costs — add up to more than the standard deduction for your filing status.

For 2026, the standard deduction is $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for head of household.¹ For 2025 returns, the figures are slightly lower: $15,000 single, $30,000 joint, $22,500 head of household. If your itemized total falls below the applicable figure, take the standard deduction and skip the SALT calculation altogether.

Add Up Your State and Local Income Taxes

State and local income taxes, real property taxes, and personal property taxes are the three categories that qualify under federal law.³ Start with income taxes.

Pull your Form W-2 and look at Box 17, which shows state income tax withheld from your paychecks. Then check any 1099 forms — 1099-G for unemployment, 1099-INT for interest, and so on — for state withholding. Add:

State and local income tax withheld shown on W-2s and 1099s
Estimated state or local income tax payments you sent in during the year’s quarterly deadlines
Any balance-due payment you made during the year on a prior-year state return

That sum is your income tax figure for the SALT comparison.

Or Calculate Your General Sales Taxes

Federal law lets you deduct state and local income taxes or general sales taxes, but not both in the same year.⁴ You have two ways to figure the sales tax number.

The first is to add up the sales tax from every receipt you kept during the year. Accurate, but impractical for most people.

The second is the IRS Sales Tax Deduction Calculator, which uses optional state sales tax tables. You enter your income, dependents, and zip code, and the tool estimates the sales tax someone in your situation typically pays.⁵ On top of the table amount, you can add the actual sales tax you paid on certain big-ticket purchases:

Motor vehicles: cars, trucks, motorcycles, motor homes, and RVs, including leased vehicles
Boats and aircraft, only if taxed at the same rate as general retail purchases
Homes, including mobile and prefabricated homes and major renovations, again only if taxed at the general sales tax rate

Don’t include sales tax on items used in a trade or business; those go elsewhere as business expenses.⁶

Pick the Larger Number

Compare your income tax total with your sales tax total and use whichever is bigger. In states with no income tax, sales tax is the obvious pick. In states with both, income tax is usually higher, but a large vehicle or home purchase during the year can flip the answer. Run both.

Add Your Property Taxes

Real estate taxes are the next component. Locate your annual property tax bill or the year-end statement from your mortgage lender showing amounts disbursed from your escrow account. Count only taxes actually paid during the tax year, not amounts billed for future periods.

Personal property taxes qualify too, as long as the tax is based on the value of the item. The most common example is the annual vehicle registration tax in states that charge one. Keep those receipts.⁴

Payments That Don’t Count

Not every payment to a state or local government belongs in this total. Leave these out:

Federal income tax and Social Security tax
Fees for services such as water, sewer, and trash collection
Homeowner’s association dues
Transfer and stamp taxes on the sale of property
Estate and inheritance taxes
Fines and penalties, including parking tickets and tax penalties
Driver’s license, marriage license, and pet license fees
Local benefit assessments for sidewalks, streets, or other improvements, unless the charge covers maintenance, repair, or interest

Including any of these can prompt an IRS adjustment to your return.⁷

Apply the Federal SALT Cap

Once you’ve added the larger of income or sales taxes to your property taxes, apply the cap. The One Big Beautiful Bill Act, signed in July 2025, replaced the original $10,000 cap with a higher limit indexed for inflation.

For 2025 returns, the cap is $40,000, or $20,000 married filing separately.² For 2026, it’s $40,400 and $20,200.¹ The cap keeps rising by roughly 1% each year through 2029. In 2030, it’s scheduled to drop back to $10,000 unless Congress acts.

If your total is at or below the cap, deduct the actual amount. If it’s above, deduct the cap.

Filing a 2024 return, or amending one? The old $10,000 cap ($5,000 married filing separately) from the Tax Cuts and Jobs Act still applies to that year. The higher cap starts with tax year 2025.

Phase-Down for Higher Earners

The full cap is only available if your modified adjusted gross income is at or below $505,000 ($252,500 married filing separately). Above that, the cap shrinks by 30 cents for every dollar of income over the threshold, with a floor of $10,000 ($5,000 married filing separately).

Here’s the math for 2026. Suppose your modified adjusted gross income is $550,000. The excess over $505,000 is $45,000. Multiply by 30% to get $13,500. Subtract that from the $40,400 cap and your personal cap is $26,900. The cap reaches its $10,000 floor once income hits roughly $606,333.⁸

Enter the Numbers on Schedule A

Reporting the deduction is mechanical once the calculation is done. On Schedule A of Form 1040:

Line 5a: state and local income taxes, or sales taxes if you chose that option. Check the box to indicate which one.
Line 5b: state and local real estate taxes.
Line 5c: state and local personal property taxes.
Line 5d: the sum of 5a, 5b, and 5c.
Line 5e: the smaller of Line 5d or your applicable cap. If your income exceeds the phase-down threshold, use the State and Local Tax Deduction Worksheet to figure your personal cap first.

Line 5e is your SALT deduction. It combines with your other itemized deductions on the last line of Schedule A, and that total flows to Form 1040 to reduce your taxable income.² Software handles the transfer automatically; paper filers attach Schedule A to the 1040.

Two Situations That Can Change Your Result

A State Tax Refund From a Prior Year

If you deducted state or local income taxes in a prior year and later got a refund, some or all of that refund may be taxable federal income for the year you received it. Under the tax benefit rule, you only owe tax on the refund to the extent the original deduction actually reduced your tax bill.⁹ If you were capped at $40,000 but paid $48,000 in state taxes, $8,000 of your deduction produced no benefit, so a refund up to that amount isn’t taxable. If you took the standard deduction in the prior year, no part of the refund is taxable. The state will send Form 1099-G for the refund amount.

The Alternative Minimum Tax

The alternative minimum tax runs a parallel calculation that disallows the SALT deduction entirely. If your AMT liability comes out higher than your regular tax, you lose the SALT benefit for that year regardless of the cap. The One Big Beautiful Bill Act did not change this. Most taxpayers with income below roughly $200,000 aren’t affected; the range from $200,000 to $600,000 with large SALT and other deductions is where the AMT is most likely to hit. Tax software runs the comparison automatically, but if you fit that profile and expect a big SALT deduction, check the AMT result before you file.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Internal Revenue Service. 2025 Instructions for Schedule A (Form 1040)
3
Office of the Law Revision Counsel. 26 USC 164 – Taxes
4
Internal Revenue Service. Topic No. 503, Deductible Taxes
5
Internal Revenue Service. Use the Sales Tax Deduction Calculator
6
Internal Revenue Service. Instructions for Schedule A (Form 1040)
7
Internal Revenue Service. Publication 17, Your Federal Income Tax
8
Internal Revenue Service. 2025 Instructions for Schedule A (Form 1040) – Section: State and Local Tax Deduction Worksheet
9
Office of the Law Revision Counsel. 26 USC 111 – Recovery of Tax Benefit Items