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Tax expenditureState & local§164

Deduction for state and local taxes

State and local taxes paid reduce federal taxable income, up to a cap.

Estimated annual cost
$49.1B
$49,100,000,000 · FY2025
0.70% of all federal spending in FY2025Total outlays $7.0T · Treasury, Monthly Treasury Statement, receipts, outlays and deficit/surplus
8 months ago

JCT line: "Deduction of nonbusiness State and local government taxes". Rises to $65.5B by FY2029, reflecting the higher cap enacted in 2025.

By total cost
#14
Most cost, least good
#10
Most good, least cost
#15
Benefit concentration
Spread outConcentrated
79/ 100, concentrated

JCT Table 3 puts 78% of the deduction on returns over $200,000. Available only to itemisers, worth more at higher marginal rates, and largest where both incomes and state taxes are high.

Published distribution
78%
goes to returns over $200,000
2%
goes to returns under $100,000

Of $57.5B in total benefit. JCT, Estimates of Federal Tax Expenditures for Fiscal Years 2025-2029 (JCX-45-25), Table 3.

How many claim it
9.29%14,928,282 returns, state and local taxes

Of 160,602,107 returns filed for tax year 2023. IRS, Statistics of Income, Individual Income Tax Returns, Table 2.1 (TY2023).

JCT, Estimates of Federal Tax Expenditures for Fiscal Years 2025-2029 (JCX-45-25), Table 3 unverified

Structural reading

The most politically scrambled item on this list, which is why it belongs here. The 2017 cap was enacted by a Republican Congress and fell hardest on high-income households in Democratic states; the 2025 increase was enacted by a Republican Congress and reversed much of it. Neither move maps onto the usual account of which party favours which constituency, and both were driven by geography rather than ideology. It is also the rare case of a large preference genuinely narrowed, briefly, which makes the subsequent partial restoration a useful data point about how durable such narrowings are.

Who gets it

The channels the benefit actually flows through, described by asset position, entity form and form of return. Never by named individuals.

$38.8B79%
to a narrow class
$10.3B21%
spread broadly

Cost split by the concentration score. That score is a judgement rather than a published figure, so treat this as the scale of the split, not an audited allocation.

  • Itemising households in high-tax jurisdictions

    The deduction's value is the product of the state tax paid and the federal marginal rate, so it is largest for high earners in high-tax states and zero for the majority who take the standard deduction.

  • State and local governments, indirectly

    By softening the net cost of state and local taxation for the households that pay most of it, the deduction reduces resistance to raising those taxes, a federal subsidy to subnational revenue.

Who pays

Taxpayers generally, including residents of low-tax states and the majority of filers who do not itemise.

This transfer follows a general pattern, asymmetric organisation, sustained expert attention, and scheduled expiry dates.

How rent-seeking works →

Legislative history and accountability

Enacting statutes, major amendments, recorded votes with party breakdown, and live reform proposals.

Enabling legislation

  • Revenue Act of 1913Oct 3, 1913

    State and local taxes were deductible from the outset of the modern federal income tax, partly to avoid taxing the same income twice.

    No separate recorded vote on this provision, it passed by voice, predates recorded electronic voting, or moved inside a larger package voted on as a whole.

Major amendment

Sources and data freshness

Annual costJCT, Estimates of Federal Tax Expenditures for Fiscal Years 2025-2029 (JCX-45-25), Table 1 published Dec 3, 2025
Concentration basisJCT, Estimates of Federal Tax Expenditures for Fiscal Years 2025-2029 (JCX-45-25), Table 3 unverified

Published within the last year. Figures marked unverified are seed estimates that have not been reconciled line-by-line against the primary source document. See the methodology for how each score is constructed.

Cite this figure
JCT, Estimates of Federal Tax Expenditures for Fiscal Years 2025-2029 (JCX-45-25), Table 1, published Dec 3, 2025. FY2025 estimate for "Deduction for state and local taxes": $49,100,000,000. https://www.jct.gov/publications/2025/jcx-45-25/

Via RentSeek, https://rentseek.bothand.tech/transfer/salt-deduction

The primary document is cited first on purpose. Send your reader to the source table rather than to this site, which is a finding aid and not the authority for any figure on it.