IRC §164 · 26 U.S.C. §164
IRC §164: Deduction for Taxes Paid (SALT)
IRC §164 deducts state and local taxes — with the SALT cap OBBBA lifted from $10,000 to $40,000 for 2025–2029. Above that, property and income taxes are nondeductible personal cost.
What it governs
- SALT deduction for state income or sales tax plus property tax
- OBBBA cap: $40,000 for 2025–2029, phasing out at higher incomes
- Business taxes (payroll, excise, real-estate on business property) uncategorized and uncapped
- PTET workarounds: pass-through-entity taxes that sidestep the cap where states allow
In the GuideFull treatment in Chapter 3 of the Guide — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).
Related sectionsIRC §183 — when the “business” taking deductions isn’t one · IRC §121 — the home whose property tax §164 covers
From the practiceStart the consultation — Paul on video, one question at a time →
Questions this section answers
- What is the SALT cap now?
- OBBBA lifted the $10,000 TCJA cap to $40,000 for 2025 through 2029, with phaseouts at higher incomes. Married filing separately gets half. After 2029 the statute needs another act of Congress.
- Income tax or sales tax — which do I deduct?
- Whichever is larger: deduct state income tax OR sales tax (actual receipts or the IRS tables), plus real property tax, all inside the cap. No-income-tax states make the sales-tax election the automatic pick.
- Do business taxes hit the SALT cap?
- No — the cap covers personal state and local taxes only. Employer payroll taxes, business property tax, and deductible excise taxes stay fully deductible on the business return.
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The Guide treats 149 Code sections across 24 chapters — every claim verified against primary sources.
Get the Guide — $299