SALT cap

The SALT cap is a $10,000-per-return limit on the federal income tax deduction for state and local taxes, introduced by the Tax Cuts and Jobs Act of 2017. The cap covers state income tax, property tax, and (limited) sales tax combined. For taxpayers in high-tax states, the cap is the binding constraint on what part of state-and-local taxes produce federal tax savings.

How it works: itemized deduction calculation: a filer adds up all eligible state and local taxes paid, then caps the total at $10,000. Anything above the cap doesn't reduce federal taxable income. For a New York or California filer with $20,000 in state income tax and $15,000 in property tax ($35,000 of total SALT) only $10,000 reduces federal taxable income. The other $25,000 is paid but doesn't produce federal savings.

Why it matters: in calculator terms, the SALT cap shows up in two places. In the rent-vs-buy and affordability calculators, the tax-savings line reflects the cap, property tax above $10k doesn't reduce federal tax for filers who itemize, and most filers in high-tax states with property tax above the cap effectively get no federal tax break on property tax. In the rent-vs-buy comparison, the cap makes buying meaningfully less tax-advantaged than it was pre-2018.

Common gotcha: the SALT cap was scheduled to sunset at the end of 2025 under the original TCJA. Subsequent legislation has modified the cap structure, and ongoing political debate about repeal makes long-range planning around it uncertain. For filers planning around the cap (whether to bunch property tax payments, whether to time deductions across years, whether to itemize at all) current-year IRS guidance and a CPA's read are the right inputs, since the rules have been moving.