State Deductions

SALT Tax Deduction Limit

Itemizing deductions can offer a higher deduction amount than the standard deduction. This is why we suggest calculating the total itemized deduction amount first, then deciding whether to itemize or take the standard deduction.

As of now, the standard deduction is $12,400 for single filers, $24,800 for joint filers, and $18,650 for head of household. If the total itemized deductions exceed these amounts—depending on your filing status, you should itemize rather than taking the standard deduction.

One thing you can do to boost your itemized deductions is to claim the SALT deduction. This stands for State and Local Taxes. All Americans pay state taxes to a certain degree. For example, paying personal property and/or local or state real estate taxes grant you a deduction on your federal income tax return. Claiming the SALT deduction is a convenient way to lower taxable income. Since you already paid these taxes, you have no expenses, thus, the deduction becomes free of cost.

Maximum SALT Deduction

The Tax Cuts and Jobs Act of 2017 changed a lot of things about the U.S. tax code. While the federal standard deduction nearly doubled, there have been cuts and limits on certain itemized deductions. This includes the SALT deduction.

From 2017 and beyond—including 2020, the maximum SALT deduction a taxpayer can claim is $10,000. This is doubled for joint filers. So instead of $10,000, joint filers can deduct as much as $20,000.

The SALT deduction benefits the high-income earners the most. Prior to the change in 2017, about 77% of taxpayers with an adjusted gross income of $100,000 or more claimed SALT deductions on their federal income tax returns. The $10,000 cap on the SALT deduction made the standard deduction a lot more appealing to many taxpayers. Especially with the increased standard deduction.

These changes make itemizing less attractive for many taxpayers. Same as the previous year, we expect eight out of ten taxpayers to claim the standard deduction as a means to reduce taxable income.

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