26 Feb I’m a homeowner. What’s happening with the SALT deduction?

Q. This will be the first tax return I file since becoming a homeowner last summer. I thought I would be able to deduct property taxes but now I’m confused about it. Can you explain the SALT deduction and how this will affect my taxes, and is this supposed to change soon or not?
— Homeowner

A. Congratulations on becoming a new homeowner.

There have been changes with a deduction commonly known as SALT, which is short for State and Local Taxes.

The Tax Cuts and Jobs Act (TCJA), effective for tax years 2018 to 2025, limited the amount of the SALT deduction to $10,000, regardless of the amount of state and local income taxes or real estate taxes paid, said Gerard Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield.

He said the federal tax code allows taxpayers a tax deduction as an Itemized Deduction (Schedule A Form 1040) for the following taxes paid:

• State and local income taxes OR general sales taxes – you cannot deduct both
• State and local real estate taxes
• State and local personal property taxes

“Prior to the TCJA, the SALT deduction was not limited, however, taxpayers in high income tax and property tax states like New Jersey would often be subject to the Alternative Minimum Tax (AMT) as SALT are not deductible for AMT purposes,” Papetti said. “So, although there was no limit on SALT deductions for regular tax purposes, the AMT would often limit the ability to reduce the taxpayer’s federal income tax.”

Papetti notes that one benefit of the TCJA was to substantially increase the standard deduction, so taxpayers can claim the greater of their itemized deductions or the Standard Deduction.

“Therefore, in your specific situation, when you include your New Jersey real estate taxes as well as income taxes on Form 1040 Schedule A, even though they may exceed $10,000, you will be limited to this amount for the 2024 and 2025 tax years,” he said.

The TCJA expires in 2025, though, so unless the tax law is changed this year, the SALT cap of $10,000 will no longer apply effective Jan. 1, 2026, he said.

“If the total of your itemized deductions does not exceed your standard deduction, you are effectively not receiving any tax benefit for real estate taxes paid,” Papett said.

In addition to the SALT deduction Federal allowable itemized deductions also include, deductible medical expenses, mortgage and investment interest, charitable contributions, casualty and theft losses and others.

“The SALT deduction has been in the news recently as to possibly increase the deduction limit or repeal it all together,” Papetti said. “Stay tuned as we should have more information as to a possible tax law change later this year.”

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This story was originally published in February 2025.

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