The state and local tax (SALT) deduction allows eligible taxpayers to reduce their federal taxable income by deducting certain taxes paid to state and local governments — typically income, sales and property taxes. 

However, the rules surrounding the SALT deduction have changed in recent years, making it challenging to understand whether it can meaningfully affect your return. If you live in a high-tax state or own property with a significant tax bill, it’s worth reviewing how the SALT deduction fits into your broader tax strategy. 

An Ameriprise financial advisor can help you understand your options and identify a tax-efficient approach that aligns with your financial goals. Here’s an overview of the SALT deduction, what’s changed and how you can use it to your advantage: 

What is the SALT deduction? 

The SALT deduction allows tax filers to lower their federal taxable income by the amount they’ve already paid in certain state and local taxes, helping to prevent double taxation on the same income.  Because it’s only available to those who itemize deductions, SALT tends to benefit individuals in states with higher income and property taxes — such as California, New Jersey and New York — the most (subject to the phase-out limits discussed below). 

What taxes qualify for the SALT deduction? 

Not every local tax you pay is deductible. Generally, you can deduct: 

• State and local property taxes 
• PLUS one of the following: 
  • State and local income taxes OR 
  • State and local general sales taxes 

The SALT deduction generally does not apply to taxes on investment properties. However, IRS rules are complex, so consult a tax professional for personalized guidance. 

What is the current SALT deduction limit? 

Starting in the 2025 tax year, the maximum amount a household can deduct in state and local taxes is $40,000 (or $20,000 if you’re married and filing separately). The deduction begins to phase out for individuals with modified adjusted gross incomes (MAGI) above $500,000 (or $250,000 if you are married filing separately). The phase-out does not drop below $10,000, the previous SALT cap. 

How do recent tax law changes impact SALT deductions? 

In 2017, the Tax Cuts and Jobs Act (TCJA) capped the SALT deduction at $10,000 per household, significantly impacting residents in states with high income and property taxes, as their total state and local tax burden often exceeded this limit.  

In 2025, that cap was temporarily increased to $40,000 for the 2025-2029 tax years, with a 1% annual increase over the five-year period, as part of the One Big Beautiful Bill Act (OBBBA). The new cap — which is subject to a MAGI phase-out beginning at $500,000 — will revert to $10,000 in 2030 unless Congress acts.  

How can I maximize my SALT deduction? 

In light of the recent SALT deduction changes, consider the following tips: 

• Plan for the temporary window. Because the higher cap is set to expire in 2030, you have a limited time to take advantage of it. Careful planning now can help you maximize these benefits before the limit drops back down. 
• “Bunch” your itemized deductions for a bigger impact. If your total itemized deductions are close to the standard deduction amount, you might benefit from a "bunching” tax strategy. This involves timing certain deductions — such as charitable donations or medical expenses — to fall into a single tax year. This concentrates your expenses to surpass the standard deduction threshold, allowing you to itemize and fully utilize the SALT deduction in one year, while taking the standard deduction in the next. 
• Manage your taxable income. Because the $40,000 cap begins to phase out at a MAGI of $500,000, keeping your taxable income under that threshold can preserve your deduction eligibility. Strategies to reduce your MAGI might include maximizing contributions to pre-tax retirement account, managing investment capital gains or deferring income to the next tax year. 

Explore tax strategies that could benefit you 

Leveraging tax credits and deductions is just one way to use the tax code to your advantage. An Ameriprise financial advisor can work with your tax professional to identify additional strategies that align with your financial goals, while also potentially lowering your tax burden.