Taxes Paid

by | Jun 17, 2026 | Individual Tax

Taxpayers may deduct certain state and local taxes (SALT) and specific other taxes when itemizing deductions. These deductions apply only to taxes the taxpayer is legally liable to pay.

Deductible Taxes

State and Local Taxes (SALT)

Taxpayers may deduct state and local:

  • Income taxes or general sales taxes (but not both)
  • Real estate taxes (annual tax based on property value)
  • Personal property taxes (must be based solely on value and imposed yearly)

Other Deductible Taxes

  • Foreign income taxes (if not claiming the foreign tax credit)
  • Generation‑skipping tax on certain income distributions

SALT Deduction Limits

2018–2025 (TCJA)

  • SALT deduction capped at $10,000 ($5,000 MFS)

2025–2029 (One Big Beautiful Bill Act)

  • Limit temporarily increased to $40,000 ($20,000 MFS)
  • Limit phases down when MAGI > $500,000 ($250,000 MFS)
  • Cannot phase below $10,000 ($5,000 MFS)
  • Limit and MAGI threshold increase 1% per year from 2026–2029

2030 and Later

  • Limit reverts to $10,000 ($5,000 MFS)

Rules for Deductible Taxes

Income or Sales Tax

Taxpayer may deduct either:

  • State/local income tax, or
  • State/local general sales tax

Real Estate Taxes

Deductible if:

  • Based on assessed value
  • Levied uniformly throughout the community
  • Used for general public purposes

Special rules:

  • When property is bought or sold, taxes are prorated based on days owned
  • Taxes paid through escrow are deductible only when paid by the mortgage servicer

Personal Property Taxes

Deductible only if:

  • Based solely on value
  • Imposed annually, even if collected irregularly

Nondeductible Taxes

The following taxes cannot be deducted:

  • SALT above the annual limit
  • Foreign real estate taxes
  • Charges for specific services (trash collection, per‑house fees, etc.)
  • Charges for property improvements (added to basis)
    • Exception: repairs to maintain existing public facilities are deductible
  • Transfer taxes (stamp taxes)
  • Rent increases due to higher property taxes
  • HOA fees
  • Foreign personal or real property taxes
  • Employment taxes (Social Security, Medicare)
  • Estate, inheritance, legacy, succession taxes
  • Gift taxes
  • Federal income taxes and most excise taxes
  • Fines and penalties
  • Customs duties
  • License fees (marriage, driver’s license, etc.)
  • Per capita taxes