2025 SALT Deduction Cap Rises to $40,000 for Most Filers

Use this guide to decide—quickly and confidently—whether you qualify to claim an itemized deduction for taxes on Schedule A for the 2025 tax year, what counts, what doesn’t, and what you can do if you don’t qualify yet.

Quick Yes/No Eligibility Check for Claiming Taxes on Schedule A (2025)

Answer each item below. If you answer Yes to at least one deductible category and your total itemized deductions exceed your standard deduction, you likely qualify to claim an itemized deduction for taxes on Schedule A.

• Did you pay state and local income taxes in 2025? Yes/No
• If not, did you pay general sales taxes you can document instead of income taxes? Yes/No
• Did you pay real property (real estate) taxes based on assessed value that support general public services? Yes/No
• Did you pay personal property taxes that are charged yearly and based only on the value of the property (for example, a car’s ad valorem tax)? Yes/No
• Did you pay foreign income taxes and choose to take them as a deduction rather than a credit? Yes/No

If you answered “Yes” to any of the above, add them up. For 2025, the total deduction for state and local taxes (SALT)—which includes property taxes plus either income or general sales taxes—is capped at $40,000 (or $20,000 if married filing separately). Then compare your total itemized deductions (including mortgage interest, charitable gifts, medical costs over the threshold, and these taxes) to your standard deduction. If itemizing gives you a lower tax bill, you’re eligible to use Schedule A.

2025 Rules You Must Meet to Deduct Taxes on Schedule A

• The SALT cap is $40,000 for single filers and married filing jointly, and $20,000 for married filing separately. This increase takes effect in 2025 under the One Big Beautiful Bill Act of 2025 and replaces the 2018–2024 cap of $10,000 ($5,000 if married filing separately).
• Within the SALT total, you can deduct:
  • State and local income taxes, or general sales taxes, but not both.
  • Real estate taxes on real property, but only the portion based on assessed value and levied for the general public.
  • Personal property taxes if they are charged yearly and based only on the value.
• You may deduct foreign income taxes you paid if you do not claim a foreign tax credit for the same taxes. You can choose either a deduction or a credit, not both.

According to analysis by VisaVerge.com, the higher cap in 2025 will matter most for people in high-tax states and homeowners with large property tax bills, because more of their state and local taxes can now fit inside the SALT limit.

What Doesn’t Count (Non-Deductible Taxes in 2025)

You can’t claim these on Schedule A as an itemized deduction for taxes:

• Foreign real property taxes
• Employment taxes (Social Security, Medicare)
• Estate, inheritance, gift, or legacy taxes
• Federal income taxes and most excise taxes
• Fines and penalties
• Customs duties
• License fees (marriage, driver’s, pet, etc.)
• Gasoline taxes or car inspection fees
• Per capita (head) taxes
• Transfer or stamp taxes on home purchases/sales
• Rent increases tied to higher property taxes
• Homeowners’ association dues
• Special assessments that add value to your property (like new sidewalks or sewers)
• Itemized fixed charges for services unless strict conditions are met (imposed at a like rate on all property, money goes to general funds, and use isn’t limited by the fees collected)

Business rule: state and local property or sales taxes are deductible on Schedule A only when they are personal, not business. If they are tied to a trade or business or income production, they belong on Schedule C, Schedule E, or Schedule F.

When You Must Use Business Schedules Instead of Schedule A

If the taxes relate to self-employment, rental activity, or farming, claim them in the business area of your return:

• Sole proprietors: Schedule C
• Rental properties or pass-throughs: Schedule E
• Farmers: Schedule F

Example: Personal property taxes on your family car may belong on Schedule A if they meet the rules. But property taxes on a rental duplex go on Schedule E.

Detailed Requirements With Examples

• State and local income taxes vs. sales taxes
  • Choose one: deduct state and local income taxes, or general sales taxes. Not both.
  • Use actual receipts or the IRS table, plus large items (car purchase, boat, etc.).
  • Example: You live in Florida (no income tax). You bought a new car and paid sales tax, and you have receipts for everyday sales tax. You can choose to deduct sales taxes, subject to the SALT cap.
• Real estate taxes
  • Deduct only taxes based on assessed value that fund general public services (schools, fire, police).
  • When buying/selling a home: split the year’s real estate tax by days owned. The seller pays up to, but not including, the date of sale.
  • Escrow rule: if your lender escrows funds, you can deduct the tax only when the servicer actually pays the taxing authority.
  • Example: You closed on June 30. You may deduct the portion of the annual tax for July 1–December 31. The seller can deduct January 1–June 29. Check your closing statement for prorations.
• Personal property taxes
  • Deductible only if the tax is based solely on value and charged yearly (commonly car “ad valorem” taxes). Flat registration fees don’t qualify.
  • Example: Your state splits your car bill into a value-based tax and a flat plate fee. You can deduct the value-based portion, not the flat fee.
• Foreign income taxes
  • You can take a deduction for foreign income taxes or claim the foreign tax credit on Form 1116, but not both for the same taxes.
  • The credit usually reduces U.S. tax dollar-for-dollar, while a deduction lowers taxable income—so the credit is often preferable.

Key Disqualifying Factors

You likely can’t claim an itemized deduction for taxes on Schedule A if:

• Your potential itemized deductions are less than your standard deduction.
• You try to claim both state income tax and general sales tax in the same year.
• Your real estate charges are special assessments that add value to your property (new sidewalk, sewer hookup).
• Your “personal property tax” isn’t based only on value or isn’t charged yearly.
• You attempt to deduct business-related property or sales tax on Schedule A instead of the proper business schedule.
• You double-claim foreign income taxes as both a deduction and a credit.
• You include federal income tax or Social Security/Medicare tax in your itemized deduction.

Special Rules for Home Buyers, Home Sellers, and Escrow

• Proration on sale: Seller is responsible for real estate taxes up to, but not including, the date of sale. Buyer takes the rest.
• Escrow: Don’t deduct escrow deposits. Deduct only the amount the servicer posted as paid to the taxing authority that year.
• Closing credits: If you received a seller credit for taxes, that reduces your deductible amount. If you paid the seller for your share of accrued taxes, that increases your deductible amount.

Practical tip: Keep the settlement statement and the annual mortgage escrow analysis. These documents prove the timing and amount of taxes paid.

The SALT Cap in 2025: How the Higher Limit Works

• 2018–2024 cap under the TCJA: $10,000 ($5,000 if married filing separately).
• 2025 cap: $40,000 for single and married filing jointly; $20,000 if married filing separately.
• This increase benefits taxpayers in high-tax states and homeowners with large assessed values by allowing more of their taxes to be deducted.

Example: A married couple pays $22,000 in state income tax and $17,000 in real estate tax. Under the old cap they could deduct only $10,000. In 2025 they can deduct up to $40,000—their combined $39,000 now fits under the higher cap.

Foreign Tax Credit vs. Foreign Tax Deduction: Who Qualifies for Which?

• Foreign Tax Credit (Form 1116): Reduces U.S. tax dollar-for-dollar for foreign income taxes paid—often the better choice when foreign tax rates are high.
• Foreign Tax Deduction: Lowers taxable income on Schedule A; sometimes useful when foreign taxes are small or credit rules limit benefits.
• You must choose either credit or deduction for the same taxes—not both.
• If you use the Foreign Earned Income Exclusion (Form 2555), you generally can’t claim a credit or deduction for foreign taxes tied to excluded income.

Eligibility pointer for expats: If your foreign tax rate is high and you owe U.S. tax on the same income, the credit usually works better. If you’re in a low U.S. bracket and foreign taxes are modest, the deduction may be sufficient.

Alternatives if You Don’t Qualify to Itemize Taxes

• Take the standard deduction and skip Schedule A.
• If you live in a no-income-tax state, consider deducting general sales tax instead (you still must itemize to use it).
• Report property or sales taxes tied to a business on Schedule C, Schedule E, or Schedule F.
• Consider the foreign tax credit on Form 1116 if the deduction doesn’t help.
• For foreign earned wages, check if you qualify for the foreign earned income exclusion on Form 2555.

How to Improve Your Chances of Benefiting From the 2025 Rules

• Time payments: If legal in your state, pay real estate installments within the same calendar year so they count in 2025 when the SALT cap is higher. Don’t prepay unassessed taxes; those are generally not deductible.
• Pick the better state tax bucket: Compare claiming state income taxes versus general sales taxes.
• Filing status planning: Joint filing allows the $40,000 cap; married filing separately limits you to $20,000. If your broader tax situation allows, joint filing may unlock the larger cap.
• Keep clean records: tax bills, escrow statements, vehicle tax bills that show the value-based portion, and proof of payment.
• Avoid double counting: If you claim a foreign tax credit, don’t also deduct the same foreign taxes on Schedule A.

Step-by-Step: Claiming Taxes on Schedule A

1. Gather documents:
   • State income tax withholding and payment records, or sales tax receipts and big-ticket invoices
   • County/city real estate tax bills and proof of payment
   • Vehicle/personal property tax bills showing the value-based portion
   • Mortgage escrow year-end summary
   • Foreign tax statements if considering a deduction
2. Decide between state income tax and general sales tax. You can’t take both.
3. Add real estate taxes that meet the assessed-value and public-services rule.
4. Add qualifying personal property taxes.
5. Apply the SALT cap: $40,000 (single or married filing jointly) or $20,000 (married filing separately).
6. If claiming a foreign tax deduction, ensure you are not also claiming a foreign tax credit on the same taxes.
7. Compare your total itemized deductions to your standard deduction. If itemizing lowers your tax, file Schedule A.
8. For business or rental taxes, move them to Schedule C, Schedule E, or Schedule F as required.

For form instructions and official guidance, see the IRS page for Schedule A at About Schedule A (Form 1040). If you choose the foreign tax credit, use About Form 1116. For the foreign earned income exclusion, see About Form 2555.

Decision Paths for Common Situations

• Homeowner in a high-tax state: Likely qualify to itemize if combined state income (or sales) taxes and property taxes—plus mortgage interest and charity—beat your standard deduction. The $40,000 SALT cap helps in 2025.
• Renter with modest state income tax: Maybe. Without real estate taxes and with low income taxes, you may not clear the standard deduction. Compare both options.
• No state income tax (e.g., Texas, Florida): Consider deducting general sales taxes using the IRS table plus large purchases.
• Auto owner with a mixed DMV bill: Deduct only the yearly, value-based portion (not flat fees).
• Seller or buyer of a home: Deduct only your share for the days you owned the home; use the settlement statement for prorations.
• U.S. citizen abroad: Choose between the foreign tax credit (Form 1116) or a deduction on Schedule A; if you use Form 2555, don’t also claim credit/deduction on the same income.

Common Mistakes That Cause People to Lose the Deduction

• Claiming both state income and general sales tax in the same year
• Treating escrow deposits as payments before the servicer actually pays the tax bill
• Deducting special assessments that add value to the property
• Including flat car registration fees that aren’t value-based
• Putting business property taxes on Schedule A instead of the correct business schedule
• Double-claiming foreign income taxes as both credit and deduction
• Over-claiming beyond the SALT cap ($40,000 or $20,000 if married filing separately)

Documentation You Should Keep

• Local tax bills showing assessed value and levy details
• Proof of payment (canceled checks, bank confirmations)
• Lender’s annual escrow statement
• W-2s and state withholding shown on pay stubs or year-end statements
• DMV bills that break out value-based personal property tax
• Receipts or IRS table records for general sales taxes, plus invoices for big purchases
• Foreign tax statements (and Form 1116 if claiming the credit)

Why the 2025 Change Matters

From 2018 to 2024 many filers stopped itemizing because the standard deduction rose and the SALT cap limited benefits. In 2025, the higher cap restores room for more state and local taxes, making itemizing worthwhile again for households in high-tax states or homeowners with large property assessments.

Practical Tips for Timing and Choice

• If your county bills property taxes in installments, paying both within the calendar year may help you reach the higher SALT cap. Only pay assessed taxes that are due—prepayments of unassessed tax aren’t deductible.
• In no- or low-income-tax states, the general sales tax route can be better—use the IRS table plus big-ticket taxes.
• Review filing status: joint returns allow the $40,000 cap; married filing separately is $20,000.
• For cross-border workers, run both options—foreign tax credit vs. deduction—and choose what lowers your U.S. tax most.

Final Fit Check: Do You Qualify?

You’re likely eligible to claim an itemized deduction for taxes on Schedule A in 2025 if:

• You paid qualifying state and local taxes (income or sales), property taxes, or qualifying personal property taxes, and
• Your total state and local taxes fit within the $40,000 SALT cap (or $20,000 if married filing separately), and
• Your total itemized deductions exceed your standard deduction.

You’re not eligible (or it won’t help) if:

• Your itemized deductions are lower than your standard deduction,
• Your taxes are mostly non-deductible types listed above, or
• Your taxes relate to a trade or business and belong on Schedule C, Schedule E, or Schedule F.

Where to Get Official Help

• IRS guidance for Schedule A: About Schedule A (Form 1040)
• Foreign tax credit guidance: About Form 1116
• Foreign earned income exclusion: About Form 2555

These official pages explain the rules, give worksheets, and show where to enter each amount on your return.

Bottom Line Action Plan

• Add up eligible state and local income taxes or general sales taxes, real estate taxes, and qualifying personal property taxes.
• Cap that total under $40,000 (or $20,000 if married filing separately).
• Add other itemized deductions (mortgage interest, charity, medical over the threshold).
• Compare to your standard deduction to confirm itemizing helps.
• If you have foreign income taxes, decide between a deduction on Schedule A and a credit on Form 1116.
• Place any business-related taxes on Schedule C, Schedule E, or Schedule F as required.
• Keep solid proof for every number you claim.

With the higher SALT cap in 2025, more households can again claim an itemized deduction for taxes on Schedule A. A careful review of what counts—and what doesn’t—will tell you in minutes whether you qualify and how to claim the largest legal deduction under the rules.