Let’s talk about a deduction that quietly affects a lot of people, but barely gets explained.

If you’ve ever noticed that your federal tax bill feels higher than expected, especially if you own property or live in a high-tax state, the SALT deduction cap might be why.

SALT stands for State and Local Taxes. It’s not new, but it’s been limited since 2018, and that cap is still in place under the 2025 tax bill.

Let’s break down what it means, who it hurts, and whether you should care.

What Is the SALT Deduction?

SALT stands for State and Local Taxes.

The SALT deduction lets you deduct certain taxes you’ve already paid to your state or local government from your federal income tax return.

Here’s what typically qualifies:

State income taxes
Local income taxes
Property taxes (on your home or real estate)
Sales taxes (but only if you itemize instead of deducting state income taxes)

You can choose to deduct either state income tax or state sales tax, but not both.

We respect your privacy. Unsubscribe at any time.

So Why Does SALT Matter?

This deduction is meant to prevent double taxation, in other words, getting taxed once by your state and then again by the IRS on the same income.

But here’s the catch...

The $10,000 Cap. Back in 2017, the Tax Cuts and Jobs Act (TCJA) introduced a cap on SALT deductions:

You can only deduct up to $10,000 total ($5,000 if married filing separately), even if you paid much more in taxes.

That cap is still in place as of 2025 under the new “One Big Beautiful” tax bill.

Who Gets Hurt By the SALT Cap?

People living in high-tax states like California, New York, New Jersey, Illinois, or Connecticut
Homeowners with high property taxes
Self-employed individuals or high earners who itemize their deductions

If you’re in one of those groups, you’re probably paying way more than $10,000 in state and local taxes each year—but you can’t deduct the full amount.

Who Doesn’t Need to Worry?

If you take the standard deduction, SALT doesn’t apply to you.
If your state taxes are low, or you rent, you may not even hit the cap.
If your total itemized deductions are under the standard deduction ($14,600 for single filers in 2025), this won’t make a difference either.

Can Business Owners Deduct SALT in a Different Way?

If you have an S Corporation or Partnership, some states allow a workaround called PTET (Pass-Through Entity Tax).

This lets your business pay state taxes directly so you can deduct more at the federal level—but not all states allow it, and it doesn’t apply to sole proprietors.

Ask your tax preparer if your state has this option. If not, you’re stuck with the cap.

Final Thoughts

The SALT deduction cap is a quiet tax increase for people in high-tax areas. Even though it's been around since 2018, it still stings, especially for self-employed homeowners who don’t get full credit for taxes already paid.

If your tax bill feels higher than expected, this may be part of the reason.