Deduction for state and local taxes
State and local taxes paid reduce federal taxable income, up to a cap.
JCT line: "Deduction of nonbusiness State and local government taxes". Rises to $65.5B by FY2029, reflecting the higher cap enacted in 2025.
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.
Of $57.5B in total benefit. JCT, Estimates of Federal Tax Expenditures for Fiscal Years 2025-2029 (JCX-45-25), Table 3.
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.
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
- Tax Cuts and Jobs Act of 2017P.L. 115-97Dec 22, 2017
Capped the deduction at $10,000, sharply reducing its cost and making it one of the few large preferences ever meaningfully narrowed.
Party-line (Republican)Enacted through budget reconciliation. No members of the minority party voted for it in either chamber. No separate roll call on this provision is recorded here.
- One Big Beautiful Bill ActP.L. 119-21Jul 4, 2025
Raised the cap substantially, partially reversing the 2017 narrowing. JCT's rising out-year estimates reflect the change.
Party-line (Republican)Enacted through budget reconciliation, the procedure that allows passage without minority-party votes. No separate roll call on this provision is recorded here.
Sources and data freshness
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.