SALT Deduction is known as the State and Local Tax Deduction. According to the federal tax reform law, from 2018, there’s a new upper limit for the SALT deduction on a federal income tax return. For single filers, head of household filers, and married taxpayers filing jointly, the upper limit is $10,000; while for married taxpayers filing separately, the cap is $5,000. In addition, taxpayers in some states can get state tax credits through charitable contributions to government funds. And these state tax credits could be used in SALT deduction and offset the taxes owed to the state and local government.
SALT deduction policies vary from state to state, but after 2018, lots of states start to offer a taxpayer-friendly deduction option. For instance, the state of New York is going to establish a new charitable fund for health care and education. Taxpayers who make contributions to the fund can have access to a state income tax credit worth 85% of the contributions. For example, a donation of $10,000 will be deductible on the federal return as a charitable contribution, and the donator will qualify for a $8,500 credit to reduce his state income tax liability. This credit could be used, however, in addition to the original deduction. This means you can enjoy more deductions than usual if you make charitable contributions.
In short, although SALT deduction in 2018 sets an upper limit for the maximum amount of taxes deductible, lots of local governments are providing tax credits that help residents to reduce local taxes owed.