Taxes You Paid (Including State and Local, Income, Real Estate, and Personal Property Taxes)
The new tax law limits the amount of the itemized deduction you can take for state and local taxes (SALT) to $10,000 per year ($5,000 in the case of a married individual filing a separate tax return) for tax years 2018 through 2025.
Other than the general phase-out of itemized deductions based on your adjusted gross income, there wasn’t a dollar limitation on the amount of state and local taxes you could take as an itemized deduction. You could claim the following types of nonbusiness taxes as an itemized deduction:
- State, local and foreign income taxes;
- State, local and foreign real estate taxes;
- State and local personal property taxes; and
- State and local general sales taxes.
 |
For tax years 2018 through 2025, you can only claim an itemized deduction for state and local income, real estate, personal property, and general sales taxes a combined amount up to $10,000 ($5,000 for married taxpayers filing separate returns). |
How will this affect me?
Alex and Abigail are married, file a joint tax return, and typically itemize their deductions due to the amount of state and local income and real estate taxes they pay. They expect their state and local taxes to be approximately $15,000 in tax year 2018. They expect the remainder of their itemized deductions to be approximately $12,000. They’re only allowed to claim $10,000 as a deduction for state and local taxes. Therefore, they’ll benefit by taking the standard deduction on their 2018 tax return because their total itemized deductions of $22,000 is less than the $24,000 standard deduction available to them if they file a joint tax return.
The same as above, except the remainder of their itemized deductions is $16,000. In this case, their total itemized deductions of $26,000 is more than the standard deduction of $24,000 that is available to them. They’ll benefit by claiming itemized deductions rather than the standard deduction.