Chapter 11 of IRS Publication 17 explains which taxes you can deduct if you itemize on Schedule A (Form 1040), and which you cannot. It matters most to homeowners, people who pay state income tax, and anyone choosing between itemizing and the standard deduction (see chapter 10 and our standard vs. itemized guide). It touches Schedule A lines 5a to 7, Schedule 1, Schedules C, E and F, Schedule 3 and Form 1116. It runs from page 96 to page 100 of the 2025 edition; the 2023 and 2024 editions carry the same chapter on pages 97 to 101. Figures labelled 2026 are planning figures, because Pub 17 (2026) is not yet published. These are unofficial study notes in our own words; the IRS publication controls.
Key terms
| Term | Meaning in one line |
|---|---|
| SALT | State and local taxes: the income-or-sales, real estate and personal property taxes that share one cap |
| Cash-basis taxpayer | You deduct what you actually paid during the year, not what you owed |
| Modified AGI | For the cap, AGI plus certain excluded foreign, territory and Puerto Rico income |
| General sales tax | A tax at one rate on retail sales of a broad range of items |
| Escrow | Money your lender holds to pay property tax; only amounts the lender actually pays out count |
Two tests every tax must pass
- Imposed on you. You must generally own the property taxed. If your spouse owns it and pays the bill, the tax is deductible on your spouse's separate return or on a joint return.
- Paid in your tax year. A check counts on the day you mail or deliver it, if it clears. For card or online payments, the statement date is the payment date. A tax you contest is deductible only when you actually pay it. Accrual-method filers follow Pub. 538.
Memory aid: on me, in the year.
Income taxes (line 5a)
All years unless noted:
- Deductible: state and local income tax withheld from pay, estimated payments made with a reasonable basis, tax paid this year for an earlier year, and a prior-year refund you chose to apply to this year's estimate.
- Do not reduce the deduction by a refund you expect or by a prior-year refund you received. A refund of tax you deducted in an earlier year may be income, in whole or part, on Schedule 1, line 1 (Pub. 525, Recoveries); if you did not itemize that year, it is not.
- Separate federal returns: each spouse deducts only the state tax that spouse paid. With a joint state return but separate federal returns, split the tax by each spouse's share of gross income, unless both are liable for all of it.
- Mandatory contributions to eight listed state disability and unemployment funds, and to state paid-family-leave programs named in the Schedule A instructions, count as state income tax; private or voluntary plan contributions do not.
- State tax on income exempt from federal tax is not deductible, unless the exempt income is interest.
- Foreign income tax: take a deduction (Schedule A, line 6) or a credit (Schedule 3, line 1, usually with Form 1116), but neither on income excluded under the foreign earned income or housing exclusion. See foreign tax credit for India income.
The sales tax election (line 5a)
Decision test: figure both amounts, use the larger, and check the box on line 5a if you pick sales tax.
- Actual receipts. Deduct general sales tax you paid, keeping receipts. Tax on food, clothing and medical supplies counts even at a lower rate. Tax on a motor vehicle (leased vehicles included) counts, but only up to the amount at the general rate.
- IRS tables. The amount depends on your state, family size and income, meaning AGI plus nontaxable items such as tax-exempt interest, veterans' benefits and the nontaxable part of Social Security. If you lived in two states, prorate by days. You may add tax on certain specified purchases.
Memory aid: receipts or tables; income or sales; never both.
Real estate taxes (line 5b)
- What qualifies. A tax on real property levied for the general public welfare and assessed uniformly on all property in the jurisdiction, with proceeds used for general government purposes.
- What does not. Assessments for local improvements such as sidewalks (added to basis; only a documented maintenance, repair or interest part qualifies). Itemized service charges such as per-gallon water or trash fees. Transfer or stamp taxes. Rent increases from higher property tax. Association charges. One exception: a service charge imposed at a like rate on all property, not earmarked, and mixed with general revenue is deductible.
- Escrow. Deduct only what the servicer paid to the taxing authority, not what you deposited.
- Timing. Per the Schedule A instructions, only tax both paid in the year and assessed before year-end counts; prepaying an unassessed bill does not.
- Buying or selling. Split the tax by days each party owned the property in the real property tax year (the period the bill covers). The seller is treated as paying through the day before the sale, and the buyer from the sale date. Worksheet 11-1: tax times days owned, divided by 365 (366 in a leap year). Selling a home has other tax effects; see the home sale exclusion.
- Back taxes. Delinquent tax from before the year of sale is not split: the buyer adds it to basis, and the seller deducts it and adds it to the selling price.
- Other. Co-op tenant-stockholders deduct their share. Ministers and military members with an excluded housing allowance still deduct property tax. A same-year refund reduces the deduction.
Personal property taxes (line 5c)
A state or local tax qualifies if it is charged on personal property, based only on value, and charged yearly, even if collected at other intervals. If a tax is partly value-based, only that part qualifies. Example: a yearly car registration of 1% of value plus a flat $40 on a car valued at $20,000 gives a $200 deduction; the $40 is not deductible.
The SALT cap (line 5e)
- Add lines 5a, 5b and 5c to get line 5d. U.S. territory taxes count here too, except those tied to excluded income.
- 2023 and 2024: line 5e is the smaller of line 5d or $10,000 ($5,000 if married filing separately).
- 2025: if modified AGI is $500,000 or less ($250,000 married filing separately) and you have no Form 2555, Form 4563 or Puerto Rico exclusion, line 5e is the smaller of line 5d or $40,000 ($20,000). Otherwise use the State and Local Tax Deduction Worksheet: cap = $40,000 minus 30% of the excess over $500,000 ($250,000 if married filing separately), but not below $10,000; married filing separately then takes half of the result, so the separate-return cap falls 15 cents (not 30) for each dollar over $250,000.
- 2026 (planning figures): same method with $40,400 and $505,000.
- The cap hits the $10,000 floor at modified AGI of $600,000 for 2025 and about $606,333 for 2026 (planning; our arithmetic).
- After 2026 the amounts grow to 101% of the prior year through 2029, then return to $10,000 for 2030 and later with no phase-down.
Memory aid: forty minus thirty cents per dollar over five hundred thousand; floor ten.
Taxes you cannot deduct on Schedule A
- Federal income tax, including withholding.
- Social Security, Medicare and railroad retirement tax. Half of self-employment tax is instead an adjustment on Schedule 1, line 15.
- Estate, inheritance and gift taxes. Exception: estate tax on income in respect of a decedent goes on Schedule A, line 16.
- Fines and penalties; personal license fees (marriage, driver's, pet); per capita taxes; foreign personal property and real estate taxes.
Taxes on business, rental or farm property go on Schedule C, E or F, outside the Schedule A cap. Other itemized items are in chapter 12.
By tax year: 2023, 2024, 2025 and 2026
| Item | 2023 | 2024 | 2025 | 2026 planning |
|---|---|---|---|---|
| Overall SALT cap | $10,000 | $10,000 | $40,000 | $40,400 |
| Cap if married filing separately | $5,000 | $5,000 | $20,000 | $20,200 |
| Phase-down starts at modified AGI | none | none | $500,000 ($250,000 MFS) | $505,000 ($252,500 MFS) |
| Phase-down rate and floor | none | none | 30%; $10,000 ($5,000 MFS) | 30%; $10,000 ($5,000 MFS) |
| AGI line on Form 1040 | 11 | 11 | 11b | 11b (draft) |
| Schedule A total goes to Form 1040 line | 12 | 12 | 12e | 12e (draft) |
2026 column: planning figures from the 2025 law (P.L. 119-21), restated in Pub. 505 (2026) and the 2026 draft Schedule A; Pub 17 (2026) is not yet published.
Rule changes by year:
- 2023 and 2024: the chapter text is the same apart from dates and sample numbers. A Reminder calls the $10,000 limit temporary. The 2024 sample worksheet divides by 366 because 2024 was a leap year.
- 2025: the cap rose to $40,000 with a phase-down, and line 5e needs a worksheet at higher incomes.
- 2026 (planning): $40,400 and $505,000. Pub 17 (2023 to 2025) bars foreign real estate tax. The 2025 law removed the end date from the code section behind that bar (IRC 164(b)(6)), so by the statute it continues for 2026, except for taxes on business or rental property. The 2026 Schedule A instructions are not yet published, so confirm there.
Worked examples
Example 1 (tax year 2024). Dana and Chris file jointly. They paid $8,200 of state income tax, $6,300 of real estate tax and $300 of value-based vehicle tax. Line 5d is $8,200 + $6,300 + $300 = $14,800. The cap is $10,000, so line 5e is $10,000 and $4,800 is lost.
Example 2 (tax year 2025). Lena and Arturo file jointly with modified AGI of $560,000 and $48,000 of state and local taxes. Cap = $40,000 − 30% × ($560,000 − $500,000) = $40,000 − $18,000 = $22,000, so line 5e is $22,000. At $620,000 the formula gives $4,000, so the $10,000 floor would apply.
Example 3 (tax year 2025). Nia sells her home on April 11, 2025. The calendar-year property tax is $3,650 and the buyer pays the whole bill. Nia owned the home 100 days (January 1 to April 10). Her deduction is $3,650 × 100 ÷ 365 = $1,000, and she adds $1,000 to her selling price. The buyer deducts $2,650 (265 days) and adds $1,000 to the cost of the home.
Common mistakes and exam traps
- Deducting both income tax and sales tax on line 5a.
- Using the $40,000 cap on a 2023 or 2024 return, or $10,000 on a 2025 return.
- Forgetting the 30% phase-down once modified AGI passes the threshold.
- Deducting the whole escrow deposit instead of what the lender paid.
- Treating trash fees, water charges, special assessments or association dues as real estate tax.
- Reducing the deduction by an expected refund.
- Putting half of self-employment tax on Schedule A.
Forms and lines map
| Form and line (2025 form) | What goes there |
|---|---|
| Schedule A, line 5a | Income tax or general sales tax; check the box for sales tax |
| Schedule A, lines 5b and 5c | Real estate tax and personal property tax |
| Schedule A, lines 5d and 5e | Total of 5a to 5c, then the smaller of that total or the cap |
| Schedule A, line 6 | Other taxes, including foreign income tax if not claimed as a credit |
| Schedule 1, line 1 | Taxable state or local income tax refund |
| Schedule 1, lines 8z and 15 | Taxable real estate tax recovery; half of self-employment tax |
| Schedule 3, line 1 and Form 1116 | Foreign tax credit alternative |
| Schedules C, E, F | Taxes on business, rental or farm property |
| Worksheet 11-1 (Pub 17) | Buyer and seller split of real estate tax |
The 2026 draft Schedule A keeps lines 5a to 5e with the new 2026 amounts; later lines are renumbered.
Check yourself
(2024) A couple filing jointly paid $9,000 of state income tax and $7,000 of property tax. What goes on line 5e?
Answer: $10,000. The total of $16,000 is above the 2024 cap.
(2025) A single filer has modified AGI of $540,000. What is the SALT cap?
Answer: $28,000, which is $40,000 − 30% × $40,000.
(2025) A married-filing-separately filer has modified AGI of $240,000. What is the cap?
Answer: $20,000. Income is under the $250,000 threshold, so no reduction applies.
(all years) Can you deduct state income tax and general sales tax in the same year?
Answer: No. Line 5a takes one or the other.
(2025) A home is sold on June 30, 2025. The seller owned it 180 days of the tax year, and the year's tax is $4,380. What is the seller's deduction?
Answer: $2,160, which is $4,380 × 180 ÷ 365.
(2025) A car is taxed at 2% of its $15,000 value plus a flat $30. What is deductible?
Answer: $300. The flat $30 is not based on value.
(2025) A lender collects $9,000 into escrow and pays the county $8,400. What can you deduct?
Answer: $8,400, the amount actually paid to the taxing authority.
(2026 planning) A single filer has modified AGI of $520,000. What is the cap?
Answer: $35,900, which is $40,400 − 30% × $15,000.
Frequently asked questions
Is the SALT cap $10,000 or $40,000?
It depends on the year: $10,000 for 2023 and 2024, $40,000 for 2025 (reduced above $500,000 of modified AGI), and a planning figure of $40,400 for 2026. See our SALT deduction guide and, for state effects, Illinois.
Do I have to pick between state income tax and sales tax?
Yes. Line 5a allows state and local income tax or general sales tax, not both. Compare the two and use the larger.
Can I deduct my homeowners' association dues or the trash fee on my tax bill?
Not as real estate tax. Association dues are not imposed by a government, and itemized service charges are fees. Rental property is different; see rental property taxes.
Can a CPA check my Schedule A?
Yes. A CPA can review a return, including the SALT cap and property tax records, against the rules for the year in question.
Official sources
- IRS Publication 17 (2025), chapter 11
- IRS Publication 17 (2024), chapter 11
- IRS Publication 17 (2023), chapter 11
- IRS: 2025 Instructions for Schedule A (Form 1040)
- Public Law 119-21, section 70120 (state and local tax limit)
- IRS Publication 505 (2026), What's New
- IRS: Schedule A (Form 1040) 2026 draft
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.