SALT: State And Local Tax

What is SALT?  

SALT State and Local Tax is a federal tax deduction for payments made to state, local and foreign taxing authorities during the calendar year.  

SALT State and local tax deduction on schedule A include:

  1. State and local income tax paid, or
  2. State and local general sales tax paid, whichever is higher. 

The state and local income tax paid consists of the following:

State

  • State income tax withheld from your paycheck and reported on box 17 of all of your W-2’s made to all state taxing authorities during the year.  If you work in multiple states this includes all withholding from all states
  • All State tax payments made during the year including:
    • Voluntary payments made to all state taxing authorities
    • Current year state estimated taxes paid during the current year
    • Prior year state estimated taxes paid during the current year
    • Amount paid with prior year state application for extension
    • Amount paid with prior year state income tax return
    • Refund on prior year state income tax return applied to current year
    • Installment agreement payments to all state taxing authorities
    • Levies, garnishments or confiscated refunds by all state taxing authorities
    • State estimated tax from Schedule K-1’s

Local

  • Local income tax withheld from your paycheck and reported on box 19 of all of your W-2’s made to all local taxing authorities during the year.  If you work in multiple locations this includes all withholding from all local authorities
  • All Local tax payments made during the year including:
    • Voluntary payments made to all local taxing authorities
    • Current year local estimated taxes paid during the current year
    • Prior year local estimated taxes paid during the current year
    • Amount paid with prior year local application for extension
    • Amount paid with prior year local income tax return
    • Refund on prior year local income tax return applied to current year
    • Installment agreement payments to all local taxing authorities
    • Levies, garnishments or confiscated refunds by all local taxing authorities
    • Local estimated tax from Schedule K-1’s

Other

  • Any state or local real estate withholding from sale of real property, such as California Franchise Tax Board (FTB) mandatory real estate withholding from the sale of California real property reported on Form 593
  • Any state or local disability or family leave insurance paid, such as California State Disability Insurance (CASDI) reported in box 14 of your W-2

Real Estate Tax

In addition to 1.) state and local income tax paid, or 2.) state and local general sales tax paid (whichever is higher) SALT also consists of all property tax paid such as:

  • Real estate taxes paid on principal residence
  • Real estate taxes paid on additional homes or land
  • Real estate taxes paid on vacation homes
  • Personal property tax paid on personal use vehicles
  • Personal property tax paid on personal portion of business vehicles

Foreign Tax

  • All foreign tax paid to all foreign taxing authorities, if you choose to itemize your foreign tax paid instead of reporting on Form 1116.  You cannot deduct foreign income tax paid if a foreign tax credit is claimed to any extent for the year

Under the Tax Cuts and Jobs Act the maximum amount of SALT deduction allowed is capped at $10,000.  

For more information please visit Deductible Taxes at a GlanceForm 1040 Schedule A, or IRS Topic Number 503.

For more help with tax topics please visit our Tax Help Page.

source: https://www.irs.gov